How to Explain the Anchoring Formula in Behavioral Economics

Authors

Laxman Bokati, The University of Texas at El PasoFollow
Vladik Kreinovich, The University of Texas at El PasoFollow
Chon Van Le, International University VNU HCMCFollow

Publication Date

4-2020

Comments

Technical Report: UTEP-CS-20-37

Abstract

According to the traditional economics, the price that a person is willing to pay for an item should be uniquely determined by the value that this person will get from this item, it should not depend, e.g., on the asking price proposed by the seller. In reality, the price that a person is willing to pay does depend on the asking price; this is known as the anchoring effect. In this paper, we provide a natural justification for the empirical formula that describes this effect.