Traditional economics assumes that all people are the Homo economicus. This is a logical, rational, self-interested person who weighs up all costs and benefits when making decisions to maximise their utility. However, this person does not exist as we all have bounded rationality and self-control, allowing feelings, bias and economic nudges to influence us resulting in irrational decisions.
Anchoring is the cognitive bias towards an arbitrary benchmark figure that is imprinted in our minds which we then use as a mental reference point when making decisions. In this photo, the RPR anchor price of £5 is displayed next to the new price, making it seem much lower than it really is. Originally, consumers may only have been willing to pay £1 for this body wash or a default choice, but as they can see it is £2.50 cheaper, consumers now think that they are getting a great deal and so are more willing to buy it at this price.
However, the lower price could make consumers question the quality of the body wash. It may be perceived to be poor quality or becoming obsolete so shops want to sell as many as they can quickly. This would have the opposite affect reducing demand and may result in lower sales due to the perception of lower quality.
