Gradually, according to the NY Times, Amazon is taking the list price out of its ads.
Pretty much a fiction but usually not as ridiculous as a doggie treat discount from $822.00 to $7.90 (below), the list price is typically set by a manufacturer:
Ask someone how long Mahatma Gandhi lived and you will get a higher answer if you first say, “Was Gandhi 144 years old when he died?”
In Thinking Fast and Slow, Nobel laureate Daniel Kahneman also discusses a supermarket sign that limited soup purchases to 12 cans. When the sign was up people bought more soup than when there was no cap.
Similarly, Dr. Kahneman suggests we should think further about establishing a liability maximum for personal injury cases. Sometimes a legally established maximum amount could boost an award when it otherwise would have been lower.
Our Bottom Line: Anchors
The anchoring effect is the thread that links Gandhi’s life, capping soup can purchases, and damages. As the explanation of how a number influences our subsequent behavior, the anchoring effect connects list prices to an increase in demand elasticity when it boosts our response to a lower price.
So, as unlikely as it might sound, it really is possible that a 99% discount from a ridiculous list price can influence our decision to buy doggie treats.
But why then is Amazon eliminating list prices? Let’s save our answer for another day. Your suggestions?