Why anchoring works on the price you never pay

A tag reads two hundred, crossed out, above a price of one hundred and twenty. Nobody bought the item at two hundred. The crossed-out number is not a record of a transaction; it is a reference point printed on the tag so that the second number can be evaluated against it.

What everyone sees

Shoppers treat the higher figure as history — the old price, or the price elsewhere — and assess the saving against it. The assessment is arithmetically correct and rests on an unverified premise. The premise is not questioned because prices normally report facts and the format gives no signal that this one is doing something else.

What is actually happening

Reference prices operate through the anchoring effect described by Tversky and Kahneman: an initial number shifts subsequent numerical estimates even when it is uninformative. Urbany, Bearden and Weilbaker found that advertised reference prices raised perceived value and search intentions, and that plausibility limits but does not eliminate the effect. The anchor does not need to be true or even credible to move the judgement; it needs to be present and adjacent.

Why it stays hidden

The mechanism hides because the shopper’s reasoning is sound given the input. They are not making an error of logic; they are accepting a premise that the format presents as a fact. Verification is also practically impossible — there is no accessible record of what a given item was previously offered at — so the anchor cannot be audited even by a shopper who suspects it.