Walk past a clearance rack with a shirt marked “Was $80, Now $40” and $40 feels like a bargain — even if the shirt was never really worth $80 to begin with. That’s the anchoring effect at work: the first number you see becomes a mental reference point, and every number that follows gets judged against it, even when the first number was arbitrary, inflated, or completely irrelevant to what something is actually worth.
What Anchoring Is
Anchoring is the tendency to rely too heavily on the first piece of information offered (the “anchor”) when making a judgment, even when that number has no real bearing on the correct answer. Researchers have shown the effect works even with numbers people know are meaningless — in one classic study, participants who spun a wheel landing on a high number guessed higher answers to an unrelated question than participants whose wheel landed low. The first number simply pulls the estimate that follows toward it.
Classic Anchoring in Everyday Shopping
“Was $199, Now $99” price tags are a textbook use of anchoring — the crossed-out $199 sets the reference point, so $99 feels like a discount regardless of whether $99 is actually a fair price for the item on its own. A car’s sticker price works the same way: it’s often set intentionally high, so that a “negotiated” price well below it still feels like a win to the buyer, even if it’s still above the vehicle’s real market value.
A Worked Example: Negotiating a Car Price
Say a dealer lists a used car at $18,500. If you walk in only knowing that number, your whole negotiation happens relative to their anchor — a “great deal” at $17,000 still might be well above the car’s real market value. Our guide on how to negotiate a car price covers the tactics in depth, but the anchoring principle behind it is simple: research the car’s real market value from an independent source before you ever see the dealer’s number, and let that independent figure — not the sticker price — be your own anchor going into the conversation.
Anchoring Beyond Price Tags
- Salary negotiation — Whoever names a number first tends to anchor the entire conversation around it. This is a real reason career advice often suggests letting an employer name a range first when possible, or arriving with independent market-rate data as your own anchor if you have to name a number.
- Charitable giving — “Suggested donation” tiers ($25 / $50 / $100) anchor most givers toward the middle tier, regardless of what they would have chosen to give with no suggestion at all.
- Tipping prompts — Preset percentage buttons on a payment screen anchor the tip amount toward whatever range is offered, even for purchases where that percentage wasn’t the norm before the prompt existed.
- Real estate listing prices — A home listed noticeably above its likely sale price can anchor buyers into offering more than they otherwise would have, simply because the list price set the frame.
How to Protect Yourself From a Bad Anchor
- Research an independent number — from a neutral source, not the seller — before you see their offer or price.
- Notice when a number is presented first, and ask yourself whether it’s actually relevant to the real value, or just the first thing you saw.
- Where possible, be the one who sets the anchor, using your own researched number rather than reacting to theirs.
Frequently Asked Questions
Can anchoring affect me even when I know about it?
Yes — studies show the effect persists even among people who are told about it in advance. Knowing about anchoring doesn’t make you immune; having an independent number ready before you’re exposed to someone else’s anchor is a more reliable defense than willpower alone.
Is a “was/now” price tag always misleading?
Not always — sometimes the original price was genuinely what the item sold for. But the tag is specifically designed to use the anchoring effect to make the current price feel like a bargain, so it’s worth judging the “now” price on its own merits rather than by how far it is from the “was” number.
Does anchoring only work with prices?
No — it applies to almost any numerical estimate, including salary figures, donation amounts, tip percentages, and even unrelated numeric guesses in psychology experiments. Any time a number is presented before you form your own judgment, it can act as an anchor.
The Bottom Line
The first number you see in any negotiation or purchase — a sticker price, a “was” price, a suggested donation, a preset tip — quietly shapes what feels reasonable afterward, whether or not that number reflects real value. Doing your own independent research before you’re exposed to someone else’s number is the most reliable way to keep their anchor from becoming yours.
Further Reading
- How to Negotiate a Car Price
- How to Negotiate When Buying a Home
- How to Negotiate Your Bills (and Actually Save Money)
- Risk & Decision-Making Hub
This article is educational only and is not financial, investment, or insurance advice. Investment and insurance decisions depend on your own circumstances — consider speaking with a qualified professional before acting.