Starting low but ending high: A reversal of the anchoring effect in auctions

Gillian Ku*, Adam D. Galinsky, J. Keith Murnighan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

64 Scopus citations

Abstract

Counter to the "start high, end high" effect of anchors in individual judgments and dyadic negotiations, 6 studies using a diverse set of methodologies document how and why, in the social setting of auctions, lower starting prices result in higher final prices. Three processes contribute to this effect. First, lower starting prices reduce barriers to entry, which increase traffic and generate higher final prices. Second, lower starting prices entice bidders to invest time and energy (creating sunk costs) and, consequently, escalate their commitments. Third, the traffic generated by lower starting prices can lead bidders to infer value in the item, thereby explaining previous findings that traffic begets more traffic. The authors show that barriers to entry that limit traffic (e.g., a misspelled brand name) lead to anchoring's normal assimilative effect rather than its reversal. By broadening the understanding of anchors to extended social interactions and open markets, the authors identify when and why starting prices anchor.

Original languageEnglish (US)
Pages (from-to)975-986
Number of pages12
JournalJournal of personality and social psychology
Volume90
Issue number6
DOIs
StatePublished - Jun 1 2006

Keywords

  • Anchoring
  • Auctions
  • Escalation of commitment
  • Value inference

ASJC Scopus subject areas

  • Social Psychology
  • Sociology and Political Science

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