When people make decisions, they often lean heavily on the first piece of information they get about a particular issue. In psychology, this is called the anchoring bias or anchoring effect.

Discovery of Cognitive Bias

Many old-school ideas in economics, philosophy, social science, and psychology assume that people are logical beings who make decisions based on reason. This perspective has been influential in shaping various theories since the mid-20th century.

However, experiments suggested that people consistently make judgments that don’t follow the rules of logic and probability theory. 

Tversky and Kahneman (1974) discovered that when people estimate probabilities, they don’t consider how likely something is or the size of the sample. Instead, they are influenced by irrelevant factors, like how easy it is to imagine an event or when given a random number unrelated to the situation. These mistakes in logical thinking and probability rules are called cognitive biases. 

Tversky and Kahneman (1974) explain that these biases occur because people use quick but not always accurate mental shortcuts known as heuristics.

Related: Heuristic: Meaning, Types, Significance And Examples

Significance of Cognitive Bias

The realization that people don’t always adhere to logical rules is challenging our belief in human rationality. Uncertainty about human rationality is disrupting core concepts in economics, social sciences, and logical thinking models.

Anchoring Bias and Adjustment

The anchoring bias is a mental shortcut that makes us heavily depend on the first piece of information we come across when making decisions or estimates. This initial information, called the “anchor,” tends to have a strong influence, and we often don’t adjust enough from this starting point, which can affect the accuracy of our decisions.

When we don’t think much, our decisions can get messed up by random information we came across recently—whether we saw it, heard it, or just thought about it for a moment. This thing is called anchoring. 

Why Anchoring Bias Happens: The Primacy Effect

The anchoring bias is tied to the primacy effect, where people remember initial information better. The primacy effect clarifies why the first piece of information, or anchor, gets more importance, often at the expense of later details. If people recall the initial value more than subsequent information, they tend to unconsciously perceive the initial value as more significant.

Anchoring Effect in Negotiations

Imagine you’re in the market for a new car. You check online and find out that the average price for the one you want is $27,000. When you visit a local dealer, they offer you the same car for $26,500, which you quickly agree to because it’s $500 less than what you expected to pay. However, another dealer in town has the exact same car for just $24,000, a whopping $2,500 less than what you paid and $3,000 less than the average price you saw online.

Later, you might regret not shopping around before making a quick decision. But why did you jump on the first offer so eagerly? It’s because your initial research set an anchor point in your mind—$27,000. Despite getting more information, like the possibility that other dealers have lower prices, you made your decision based on that anchor. Any price below $27,000 probably seemed like a good deal to you.

This tendency to latch onto the first piece of information, like the initial average price, is the anchoring bias.

Pay raise negotiation: Picture yourself in a situation where you’re discussing a salary increase with your boss. You might feel unsure about suggesting a specific amount, but research on anchoring bias hints that the one who puts forward the first number could gain an advantage. So, you decide to state a figure, and that becomes the anchor—the starting point for all the back-and-forth discussions. This gives you an edge in negotiations because your initial offer sets the boundaries for what’s considered acceptable. Any subsequent offers will likely revolve around that first number you proposed, making it a crucial focal point in the negotiation process.

Other Impacts Of the Anchoring Effect

• When deciding when your kids can start dating, your upbringing may set an anchor at 16. If your child argues that their peers are dating at 14, your perspective may be relative to that anchor, making 14 seem too young.
• Considering how long you expect to live is influenced by an anchoring point, often set by your parents’ lifespan. If they lived a healthy, active life, you might automatically assume a longer life for yourself, potentially overlooking differences in lifestyle.
• Your childhood TV habits can anchor your views on how much television your kids should watch. If you watched a lot, a few hours might seem acceptable, even if societal recommendations suggest otherwise.
• In medical scenarios, the anchoring effect can impact a doctor’s ability to diagnose chronic pain. The initial impression of symptoms becomes an anchor, affecting all subsequent assessments, and potentially leading to a skewed diagnosis.
• Anchoring Bias in Relationships: The anchoring bias is relevant to relationships, where people might assess their connections based excessively on the early stages. In short-term relationships, the emphasis on first impressions is crucial. A positive first impression can lead to an overall positive view of the relationship, while a negative first impression may shape a negative overall perception. This tendency is because people often focus on the initial encounters when thinking about the relationship as a whole.
• Even irrelevant or incorrect details can serve as anchors. This makes media literacy—the ability to evaluate what you see and read accurately—crucial in contemporary life.

Conclusion

The next time you’re making an important decision, consider the possible impact of the anchoring bias on your choices. Are you giving enough weight to all of the available information and possible options? Are you basing your decision on an existing anchor point?

References:

1. By, Myers, E., on, U., & 8, A. (2023). Retrieved from https://www.simplypsychology.org/what-is-the-anchoring-bias.html 
2. Kendra Cherry, Mse. (2023). Retrieved from https://www.verywellmind.com/what-is-the-anchoring-bias-2795029 
3. Lieder, F., Griffiths, T. L., M. Huys, Q. J., & Goodman, N. D. (2017). The anchoring bias reflects rational use of cognitive resources. Psychonomic Bulletin & Review, 25(1), 322–349. doi:10.3758/s13423-017-1286-8