The psychology of the asking price

[Nathan King]

There is an interesting article from Scientific American titled Why Things Cost $19.95 - What are the psychological "rules" of bartering? It doesn't delve too deeply into the subject, but provides an interesting read either way.

Here is an excerpt:

Psychologists have been studying cognitive bartering for some time, and several basics are well established. For example, an opening “bid” of any sort is usually perceived as a mental anchor.
...
University of Florida marketing professors Chris Janiszewski and Dan Uy suspected that something fundamental might be going on, that some characteristic of the opening bid itself might influence the way the brain thinks about value and shapes bidding behavior. In particular, they wanted to see if the degree of precision of the opening bid might be important to how the brain acts [during bartering].

For those interested in a deeper look into the issue, here's a link to the mentioned research. Here is an excerpt from the abstract:

Five studies show that adjustment away from a numerical anchor is smaller if the anchor is precise than if it is rounded. Evidence suggests that precise anchors, compared with rounded anchors, are represented on a subjective scale with a finer resolution. If adjustment consists of a series of iterative mental movements along a subjective scale, then an adjustment from a precise anchor should result in a smaller overall correction than an adjustment from a rounded anchor

 

[Nathan King]

I'm sure somebody will monetize this thread in the form of a blog post again...maybe I should start a blog? (kidding Adam!)