Anchoring Bias: Why The First Number Matters
You see a pair of headphones that you love, but they're $300 which is way higher than your budget. You keep searching, and you find a similar pair that's down from $1000 to $300. What a steal! That's still higher than your budget BUT so much lower than the original cost. You purchase them.
You've been anchored. Anchoring is a cognitive bias when we rely too heavily on the first piece of information. When we make decisions, the first number is super important. Whether that's a budget, a price tag or even just an arbitrary number, we interpret new information from that reference point, "anchoring" it to the past. This skews our judgment and can prevent us from making good decisions.
A little history
Coined by psychophysicists Muzafar Sherif, Daniel Taub and Carl Hovland, the "anchor" was born in a 1958 study where people were asked to estimate the weight of objects. Researchers found that the presence of an extreme weight influenced the estimation of other weights.
In the late 1970s, psychology pioneers Daniel Kahneman and Amos Tversky built on the theory. In a 1974 paper, they theorised that, when people make estimations or predictions, they begin with a starting point and adjust from there. To investigate this, they asked high school students to guess the answers to mathematical equations in short timeframes. Within five seconds, the first group were asked to estimate the product of: 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1. Group 2 were given the same sequence in reverse: 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8. The results? The median estimate for the first was 2,250 and the second was 512 showing a considerable difference based on the initial anchors. (ps. The correct answer is 40,320.) But does this hold in diverse cases?
The Pervasiveness Of Anchoring
Anchoring is considered one of the most pervasive biases. Over 40 years have passed since its inception and it has been proven in several cases. For example,
Anchoring with irrelevant numbers. In one study, people were asked to consider the last two digits of their social security number. Then, they were shown different products and asked whether they would buy it for their number. Researchers found that people with higher digits were willing to pay significantly more for the same products.
Anchoring in court decisions. In criminal court cases, prosecutors often ask for a certain length of sentence. Research shows that these numbers can become anchors that bias the judge’s decision making.
Anchoring in food. The tendency to overeat with a big plate can potentially be explained by anchoring. In one study, participants were asked to imagine a large or small plate and then estimate how much they'd eat. Researchers found the plate size influenced their estimates. This effect was present even when participants were told to discount the anchor!
So anchoring exists in many different contexts. Interestingly, a literature review demonstrated that thinking through the anchor doesn't seem to help to remove it. So what actually helps?
How To Avoid Anchoring
Avoiding the anchoring effect is difficult but research shows two strategies can help:
Consider why the anchor doesn't suit the situation. In one study, car experts were asked to reconsider the resale price of a certain car (the anchor). They were asked whether it was too high or too low, and to provide a better estimate. However, half the experts were asked to come up with arguments against the anchor price beforehand. This group showed a weaker anchoring effect!
Designate challengers. To combat anchoring before big decisions, Kahneman suggests we challenge the numbers and ask: Do we know where the numbers come from? Which numbers are facts and which are estimates? Who put the first number on the table?
Tying it up
Anchoring is a pervasive bias when we rely too heavily on the first piece of information. While discounting the anchor hasn't been demonstrated to help, considering why the anchor doesn't suit the situation and challenging where the numbers come from helps combat the anchoring bias.