Anchoring Bias

Over-relying on the first piece of information received

JudgmentDecision-making

What is it?

Anchoring bias, first documented by psychologists Amos Tversky and Daniel Kahneman, is a cognitive shortcut where the brain uses an initial piece of information as a reference point for all subsequent judgments. This anchor can be entirely arbitrary and still powerfully influence decisions. In famous experiments, even spinning a random wheel of fortune affected participants' estimates of unrelated quantities. The bias operates unconsciously—knowing about it doesn't make you immune. Professional negotiators, salespeople, and marketers regularly exploit anchoring by strategically choosing initial offers or price displays. In negotiations, whoever makes the first offer often "anchors" the entire discussion. The bias affects everything from salary negotiations to medical diagnoses to sentencing recommendations. Even experts in their fields fall prey to anchoring. The adjustment from an anchor is typically insufficient, meaning final estimates remain biased toward the initial value regardless of how irrational it may be.

Example

If a house is listed at $500,000, you might think $450,000 is a great deal, even if it's only worth $400,000. Or in salary negotiations, the first number mentioned often determines the final outcome.

References

Tversky, A., & Kahneman, D. (1974). Judgment Under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124-1131.

Epley, N., & Gilovich, T. (2006). The Anchoring-and-Adjustment Heuristic: Why the Adjustments Are Insufficient. Psychological Science, 17(4), 311-318.

Furnham, A., & Boo, H. C. (2011). A Literature Review of the Anchoring Effect. The Journal of Socio-Economics, 40(1), 35-42.

How to Prevent It

Question

What would I think if I had received different information first?

Question

Am I adjusting enough from my initial reference point?

Question

Where did this initial number or estimate come from?

Question

Is this anchor based on relevant data or arbitrary choice?

Question

What would be a completely independent estimate of this value?

Technique

Generate your own estimate before looking at provided numbers.

Technique

Consider multiple reference points objectively.

Technique

Ask each team member to estimate independently before sharing.

Technique

Research market rates and benchmarks from multiple sources.

Technique

Deliberately consider extreme high and low anchors to calibrate.

Scientific Sources

Tversky, A., Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science.

Ariely, D., Loewenstein, G., Prelec, D. (2003). Coherent Arbitrariness: Stable Demand Curves without Stable Preferences. Quarterly Journal of Economics.