The Anchoring effect

Have you ever had to take a guess at something and found yourself using anchors? For instance, when guessing the population of Russia, you might start with the fact that it’s greater than 1 and less than 7 billion, and that it’s less than the population of China. These anchors help us navigate unfamiliar territory and arrive at an estimate.

The problem is that we often use anchors when we don’t need to. Take the example of guessing the height of the tallest redwood tree. If we ask one group if it’s more or less than 1,200 feet and then ask for their best guess, and we ask another group if it’s more or less than 200 feet, we’ll likely get very different answers. That’s because of the anchoring effect – the tendency to rely too heavily on the first piece of information we receive when making a decision.

And it’s not just numbers that can serve as anchors. In an experiment conducted on German judges, each judge was read a description of a woman who had been caught shoplifting, and then asked to roll a pair of dice loaded to only add up to 3 or 9. The judges who rolled a 9 on average gave her an 8-month sentence, while those who rolled a 3 gave her a 5-month sentence. The anchoring effect was clearly influencing their judgments.

The anchoring effect can also be used to manipulate us in sales and negotiations. For example, a car salesman might start with a high price to make a lower price seem like a good deal. Or a store might put a $150 dress at the front of the store to set the anchor for a $50 dress on sale at the back of the store. Online stores, salary negotiations, and real estate deals are all potential hotspots for the anchoring effect.

The good news is that we can try to counteract the anchoring effect by proactively setting our own mental anchors. For example, we might remind ourselves to perform our own due diligence before accepting an asking price for a home, or we might aim to move first in a negotiation to anchor the other party to our preferred number. The key is to be aware of our vulnerability to the anchoring effect and to take steps to protect ourselves from it.