This report provides an analysis of anchoring bias within the framework of behavioural economics, demonstrating its practical application in business models and marketing strategies. It begins by defining behavioural economics and heuristics, contrasting them with traditional microeconomic concepts of rationality. The report then focuses on anchoring bias, illustrating how it influences consumer behaviour through examples such as multiple unit pricing, purchase quantity limits, and initial price setting. Counter strategies are discussed, emphasizing the irrationality of consumer behaviour and the role of cognitive biases in decision-making. The report further explores the implications of biases in strategic planning and meetings, highlighting issues like preference bias and groupthink. A case study of Wesfarmers is included to demonstrate the ethical utilization of behavioural economics in a large retail chain, showcasing its impact on strategic decision-making and customer orientation. The report concludes that behavioural economics is essential for enhancing business performance through improved customer handling and strategic decision-making.
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