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Welcome back — today's topic is a bias that's been quietly shaping your spending for longer than you've probably noticed.

The shirt, or the jacket, that changes value depending on what you saw first

A dress shirt priced at $60 gets judged on its own merits. That same shirt priced at $100, then marked "On Sale! 40% off! Only $60!" suddenly feels like a win, even though the actual price you'd pay never changed. According to the Federal Reserve Bank of St. Louis's own consumer education, this is the anchoring effect: the tendency to rely heavily on the first piece of information you receive when making a decision, and let it become the reference point for every judgment that follows.

The Fed's research walks through a version of this with winter jackets. Show someone a jacket priced simply at $55, and it's just a price, take it or leave it. Show that same jacket with "MSRP $120, now on sale for $55," and the exact same $55 suddenly feels like a genuine discovery. Retailers aren't guessing about this. They know consumers think about prices relatively, not absolutely, and they price accordingly.

Where the science comes from

Anchoring was first identified by psychologists Amos Tversky and Daniel Kahneman in a landmark 1974 paper. In their best-known experiment, participants watched a wheel of fortune rigged to land on either 10 or 65, then guessed what percentage of United Nations countries were African. The wheel's number had nothing to do with the real answer. Participants who saw 10 gave a median guess of 25%. Participants who saw 65 guessed 45%, a 20-point swing caused entirely by a random number.

They ran a second version too, using simple math. One group had five seconds to estimate 8 × 7 × 6 × 5 × 4 × 3 × 2 × 1. Another group saw the identical sequence in reverse, 1 × 2 × 3 × 4 × 5 × 6 × 7 × 8. Both sequences multiply to the exact same answer. The descending group's median guess was 2,250. The ascending group's median guess was 512, more than four times lower, purely because the first numbers they saw were smaller.

It's not just theory, it happens to real prices too

The St. Louis Fed's research includes a simple, relatable scenario: imagine shopping for a smartwatch online, and the first price you see is $250. From that point forward, every other smartwatch gets mentally compared against that $250 anchor, whether or not $250 was ever a fair price to begin with.

Retailers use a more subtle version of this too. Picture three similar smartwatches: one at $900, one at $750, one at $700. Most people land on the $750 option, not because they calculated its actual value, but because it's positioned as the "reasonable middle" against the $900 anchor. The $900 watch may never sell in meaningful numbers. Its job is to make $750 feel like restraint.

Tested with real money, not just a lab A peer-reviewed study in Frontiers in Psychology had 240 consumers judge the price of real tech products (VR glasses, a smart body scale, wireless earbuds) after seeing either a high or low anchor price first.
The anchoring effect showed up consistently across all three products - a high anchor produced meaningfully higher price estimates than a low anchor, for the exact same item.

Anchoring shows up in surprising places

Anchoring isn't limited to shopping. Simply Psychology's research review points to two studies worth knowing about specifically because they involve trained professionals doing their actual jobs, not just casual shoppers.

In one, real estate agents and business students toured an actual house for sale. Everyone received the same information packet, except for one detail: the listing price, deliberately set well above or below the home's true appraised value. That single arbitrary number swayed every valuation participants made, professionals included, and most agents insisted afterward that the price had played no role in their thinking, even though their own numbers said otherwise.

In another, experienced judges and prosecutors read a real case file, then rolled a pair of dice rigged to land on a low or high number. Told to treat that number as a hypothetical sentencing demand, judges who rolled the high number recommended noticeably longer sentences than those who rolled low, despite knowing full well the dice were random.

An honest caveat worth including

Not every claim about anchoring's size has held up equally well. A 2025 replication study flagged that much of the earlier anchoring research relied on small sample sizes, which can inflate how large an effect looks. When researchers reran a classic anchoring study with a much larger, properly powered sample, a previously reported 31% shift in what people were willing to bid shrank to about 3.4% - a real effect, but far smaller than the original number suggested. The direction of the anchoring effect remains one of the most consistently replicated findings in psychology. The exact size of any one number floating around, though, deserves a healthy amount of skepticism.

The question that actually helps

The St. Louis Fed's practical advice is refreshingly simple: shop around at other retailers before committing to a decision, so you have real information beyond whatever price you saw first. In negotiation, being the one to make the first offer lets you set the anchor rather than react to someone else's. And before any purchase, it's worth pausing to think beyond what's in front of you right now, toward opportunity cost - what else that same money could do - rather than just whether today's number looks smaller than yesterday's.

Simply Psychology's research adds one more concrete technique with real evidence behind it: deliberately generate reasons the anchor might be wrong. Actively arguing against the number in front of you forces your brain to retrieve information it would otherwise skip past, which is more effective than simply being warned the bias exists.

The thread that connects it all

The first price you see was rarely designed to inform you. Often, it was designed to anchor you.

Whether that's a retailer's crossed-out original price, a stranger's opening offer, or just the first number that happened to cross your path, recognizing the pattern doesn't mean every deal is fake. It means the deal is worth evaluating on its own terms, not the terms it was handed to you in.

Sources & further reading