Researcher, Poundstone tested the estimated value of a house. Two groups were considered – students and experts. Both groups were given the relevant background information. Within each group however, subgroups were told different list prices – and the list prices were found to influence the estimated prices as follows. List Price Average student Est’ Average […]

Researcher, Poundstone tested the estimated value of a house. Two groups were considered – students and experts. Both groups were given the relevant background information. Within each group however, subgroups were told different list prices – and the list prices were found to influence the estimated prices as follows. List Price Average student Est’ Average agent est $119,900 $107,916 $111,454 $129,900 $120,457 $123,209 $139,900 $123,785 $124,653 $149,900 $139,885 $127,318 These findings suggest a number of things: People when estimating value tend to select one below the price highlighted Experts are not as expert or scientific as we might have thought The price touted as the ‘listing price’ impacts directly on the estimated price While all three observations are interesting, it is the later that I will address here. This study demonstrates the power of anchor pricing or more specifically the power of an ‘anchor’. Judgements about price are very difficult…