![]() For example, when making a budget, people often rely on the following heuristic: "I'll save 10 percent of my income while I am working so that I have emergency funds to pay for daily expenses if I lose my job." While heuristics can help people make decisions quickly, they can lead to cognitive biases that limit the information they should consider when making shopping decisions. People often use heuristics, or mental shortcuts, to make decisions. Anchoring plays a role in decisions that involve numerical values such as prices. 2 The anchoring effect is a type of cognitive bias-a systematic error in thinking that affects people's judgment and decisionmaking. The tendency for a person to rely heavily on the first piece of information they receive when making decisions is known as the anchoring effect. However, it's the initial price a consumer is exposed to that becomes a consistent reference point when shopping around. Whether online or in a physical store, shopping around for a good or service usually involves constant reference to the prices. How do consumers decide if something is a good deal? How many times do you say, "Wow, that is expensive! I know it costs a lot less at the other store"? Or "Wow! Check out this steep discount!" The importance of a good deal is on many consumers' minds when they purchase goods and services. "Which would you buy? A dress shirt priced at $60 or the very same dress shirt, priced at $100, but 'On Sale! 40% off! Only $60!'?"
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