Anchoring Bias
Definition
Anchoring Bias
The tendency to rely too heavily on the first piece of information encountered (the "anchor") when making decisions, even if it is irrelevant or arbitrary.
Why Does Anchoring Happen?
- Cognitive Ease: The anchor provides a mental shortcut, reducing cognitive effort.
- Insufficient Adjustment: People often fail to adjust enough from the anchor, even when they know it's irrelevant.
Think of anchoring bias like a ship's anchor. Once it's dropped, it limits how far the ship can move. Similarly, the initial piece of information limits how far our judgments can stray.
Case studyTversky & Kahneman (1974)
Aim: To investigate how anchoring bias affects numerical estimates.
Method:
- Participants spun a wheel rigged to stop at either 10 or 65.
- They were then asked to estimate whether the percentage of African nations in the UN was higher or lower than the number on the wheel.
- Finally, they provided their own estimate.
Findings: Participants who saw the number 10 estimated an average of 25%, whereas those who saw 65 estimated an average of 45%. The arbitrary number significantly influenced their estimates.
Conclusion: Anchoring bias occurs even when the anchor is irrelevant to the task.
Real-World Applications
Pricing Strategies
- Retail: Stores display a high "original" price next to a discounted price to make the discount seem more attractive.
- Negotiations: The first offer often sets the range for subsequent negotiations.
Legal Decisions
- Sentencing: Judges may be influenced by sentencing recommendations, even if they are arbitrary.
- Jury Deliberations: Initial suggestions can sway the group's final decision.
