Mindset

Anchoring Bias

A cognitive bias in which the first number or piece of information presented acts as an "anchor," unconsciously pulling subsequent judgments in its direction. It operates in countless everyday situations, from pre-discount price tags to opening offers in salary negotiations.

What Anchoring Bias Is

Anchoring bias is a cognitive bias in which the first piece of information you encounter (the anchor) exerts an undue influence on the judgments and estimates that follow. In a well-known experiment reported by the psychologists Tversky and Kahneman in the journal Science in 1974, participants were given an irrelevant number from a wheel of fortune spun in front of them (either 10 or 65) as a starting point, asked whether the percentage of the member states of the United Nations that are African countries was higher or lower than that number, and only then asked for their own estimate. The median estimates came out at 25% for the group that saw 10 and 45% for the group that saw 65. Even when a number is plainly irrelevant, the brain ends up using it as a reference point.

Anchors Hidden in Everyday Life

Anchoring is not a laboratory phenomenon; it shapes every kind of decision in daily life. A sale tag reading "list price 10,000 yen → special price 4,980 yen" sets the list price as the anchor and makes the discounted price feel like a bargain. The figure put on the table first in a salary negotiation defines the entire range of the bargaining that follows. The asking price on a property sways the buyer's judgment of what a fair price is. When the most expensive dish on a restaurant menu is the first thing to catch your eye, the other dishes come to feel relatively cheap. All of these are anchoring at work.

Coping with Anchoring Bias

The awkward part is that anchoring does not go away merely because you know the bias exists. In a property-appraisal experiment reported by Northcraft and Neale in 1987, both students and working real estate agents who had toured the properties shifted their valuations in the direction of a manipulated listing price, and expertise did not turn out to make the effect smaller. Ways to cope include setting your own reference value independently before you decide, comparing and weighing information from several sources, and consciously asking yourself whether you are being pulled along by the first number you saw. Awareness on its own will not switch the effect off, though, so it is more reliable to build the defence into the procedure: decide your own benchmark before you look at the other side's figure, and always check market data through a separate route.

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