![]() ![]() Unfortunately, your internal anchor (12 years) was too high, and it didn’t allow you to adjust sufficiently so as to approximate the correct answer, which is actually 1.88 years. After thinking some more, you come up with your final answer: 6 years. In other words, people always end up with an answer that is close to the anchor anyway.Įxample: Anchoring and adjustmentSuppose you need to answer the question “How long does it take Mars to orbit the Sun?” but don’t know the correct answer and you’re not allowed to search for it online! You remember that Mars is between Earth and Jupiter, and that it takes 12 years for Jupiter to orbit the Sun.īased on this, you estimate that the correct answer is somewhere close to 12 years. ![]() Because the adjustment is usually insufficient, it results in a biased estimation.This initial estimation becomes an internal anchor and influences subsequent adjustments.If people don’t know the correct answer, they try to make an educated guess and adjust from there until they reach a conclusion that seems plausible.Confirmatory hypothesis testing can explain how external anchors influence our judgment.Īnchoring and adjustment is the mechanism that explains how people try to answer a general knowledge question when they don’t know the answer.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. ![]() Eliminate grammar errors and improve your writing with our free AI-powered grammar checker. ![]()
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