You should always name your price first.

You should always name your price first.

You should always name your price first

Imagine you are in a market in China and see something you like. You ask what the price is and the lady gives you a figure which seems a little steep to you. In a market, you can be sure the price she has told you is way over what she would actually accept, but how do you know how much she has added? In a nutshell, unless you are an expert, you don’t.

Because you are unlikely to be an expert, you have to base your offer on your estimate of how much she has inflated the true cost. Remember the last article, about how we are all influenced by numbers? That is what is happening now, in the market. You may assume that the lady has doubled the true value, hoping to get some extra, so you halve it to make your offer. Now you start haggling and arrive somewhere in between.

The trouble is, there is a good chance she tripled or even quadrupled the amount she would actually accept. In that case, you would have agreed to a price well over the actual value.

The only way of avoiding your first offer being so influenced by hers is to make your offer first. Decide what you are willing to pay for something, cut it in half (or a third even) and offer that.

She is a wily street trader. Her livelihood is based on her ability to haggle and she does it all day every day, so your chances of besting her are not good. However, at least you haven’t been stymied at the beginning by succumbing to her outrageously high anchor price.

 

Find out more about how the mind plays tricks on you and how your memory works by reading my books, Bias Beware and Memory Matters.

Judges should not play with dice

Judges should not play with dice

Judges, if they were allowed to play with dice, could be influenced by those dice when deciding on prison terms. I will explain how, but first I want to ask you a question:

Do you think there are more or fewer than 15 countries in Africa? Think about it for a moment. More than 15 countries in Africa or fewer?

Having considered that, now take a guess at how many countries there are.

There are actually five times eleven countries in Africa (if you include Western Sahara, which actually is not yet recognised by the UN). I have not written the number properly because I didn’t want you to see it by mistake before making your guess. I’m hoping that your maths will get you there.

I expect most people reading this will have guessed a number considerably under 55. Maybe 30 or 40. They were probably influenced by my asking if there were more or fewer than 15.

When having to make an estimate of any sort of quantity, people have a ballpark range within which they would expect the answer to be. When I asked about the number 15, you will probably have decided that it was too low. However, when you were subsequently asked to make an estimate, you probably went up from 15 until you reached the bottom of the ballpark range. If I had asked about the number 100 you would have come down from 100 until you reached the top of the ballpark range.

Your estimate of the number of countries in Africa, then, was almost certainly influenced by the number I proposed, even though it was clearly wrong. This initial figure, which so influenced you, is known as an anchor. Anchors are incredibly pervasive and their influence can be seen everywhere that figures are invented, guessed or debated.

Englich, Mussweiler and Strack showed that even experienced judges could be influenced in this way when deciding on prison sentences for criminals. The judges rolled dice first and considered whether the number rolled was too high or too low for the number of months a prisoner should serve. Then they decided how many months to actually sentence someone to. Those who rolled a three recommended an average of about five months; those who rolled a nine recommended about 8 months!

 

Find out more about how the mind plays tricks on you and how your memory works by reading my books, Bias Beware and Memory Matters.

Mailing list:

Please sign up to hear about new articles and occasional fun facts about the way we think.

If my articles interest you, you would really enjoy my book, Bias Beware, available here.

Categories

%d bloggers like this: