Mistakes in decision-making — common mistakes

When discussing anchoring in an exam, use a specific consumer example like a 'was/now' price structure or a high-priced item setting a context for other products. This demonstrates clear application of the psychological concept to consumer behaviour.

No, while price is a common anchor (e.g., the manufacturer's suggested retail price), the anchor can be any initial piece of information. For instance, a car salesperson might first mention a very high number of features, anchoring the customer's perception of the car's value, before discussing price. It can also be a quantity, like 'limit 4 per customer', which anchors the perception of a normal quantity to buy.

Commitment to a goal is based on a rational assessment of future benefits versus future costs. The sunk cost fallacy is an irrational bias. It involves continuing a course of action solely because of past, unrecoverable investments, even when a rational analysis shows that stopping would lead to a better future outcome. The key difference is whether the decision is based on future prospects (rational) or past expenditure (irrational).

No, these cognitive biases are specific, systematic patterns of deviation from rational judgement. A consumer might make a mistake for many other reasons, such as having incomplete or incorrect information, being under time pressure, or being influenced by social factors like peer pressure. While biases are a major source of irrational decisions, they are not the only cause of poor consumer choices. It is important to distinguish these systematic psychological errors from other types of mistakes.