![]() ![]() Anchoring and adjustment applies best to situations where people are influenced by an internal anchor.Why does anchoring bias happen?Īlthough there is no consensus as to why anchoring bias happens, two mechanisms can help explain this phenomenon: When we don’t have enough information to know how to value something, we are more likely to be influenced by anchors. NoteIt is important to keep in mind that the more knowledgeable we are about a certain topic, the less likely we are to fall for anchoring bias. For example, if your parents followed an active lifestyle and exercised a lot, this experience might set a standard level of exercise for you in adulthood. Internal anchors are reference points based on beliefs, experiences, or contextual clues.External anchors are reference points provided by others (for example, the suggested retail price tags we see on many products).As a result, our perception of reality is distorted, and our decisions are biased.ĭepending on their sources, anchors can be external or internal. Here, prices lower than the initial price seem like a good deal, even if they are still higher than the car’s actual value. For example, the initial price offered for a used car sets the standard for the rest of the negotiation. Once the anchor is set, subsequent judgments are made by adjusting away from that anchor, while staying within the range set by it. People hold on to this information, called an anchor, as a reference point and fail to correctly adjust their initial impressions, even after receiving additional information. ![]() Other types of cognitive bias in decision-makingĪnchoring bias (also known as anchoring heuristic or anchoring effect) is a type of cognitive bias that causes people to favor information they received early in the decision-making process.By showing you all the expensive cars first, the dealer has set an anchor, influencing your perception of the value of a used car. Having seen all the expensive options, you think these cars seem like a good bargain. Next, the car dealer walks you toward the back of the lot, where you see more affordable cars. The dealer walks you around, showing you all the higher-priced cars, and you start worrying that you can’t afford a car after all. Example: Anchoring bias You are considering buying a used car, and you visit a car dealership. Because of this, anchoring bias can lead to poor decisions in various contexts, such as salary negotiations, medical diagnoses, and purchases. Regardless of the accuracy of that information, people use it as a reference point, or anchor, to make subsequent judgments. Try for free What Is Anchoring Bias? | Definition & ExamplesĪnchoring bias describes people’s tendency to rely too heavily on the first piece of information they receive on a topic. He’s not alone people have a tendency to stop adjusting soon after reaching a satisfactory value.Eliminate grammar errors and improve your writing with our free AI-powered grammar checker. Once again, he’s fallen prey to the anchoring bias! Without further research, he overlooked the possibility that another dealer could offer a much lower price. He’s now eager to replace his car.Īfter researching the average cost for a new one that he wants, he quickly accepts the salesman’s offer, given that the price is just below the initial amount he expected to pay. Here, the driver’s estimate was insufficient and led to an unpleasant outcome-receiving a speeding ticket. His strategy uses the anchoring-and-adjustment heuristic-the mental shortcut whereby judgments made to an unknown question or situation start with anchoring information-whether arbitrary, suggested, or partially computed-that is then adjusted to yield a final answer. To make a final decision, he implicitly adjusts his estimate towards the anchor. In this instance, the number posted on the speed limit sign serves as the initial anchor-the arbitrary starting point-in the driver’s mind. ![]() When faced with uncertainty, someone may not realize that they rely on the very first piece of information they encounter, which can bias their judgment.įor example, a police officer pulls over a car for speeding. ![]()
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