Why do we compare everything to the first piece of information we received?

Anchoring Bias

, explained.
Bias

What is the Anchoring bias?

The anchoring bias is a cognitive bias that causes us to rely heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor instead of seeing it objectively. This can skew our judgment and prevent us from updating our plans or predictions as much as we should.

A cartoon titled "Anchoring Effect" shows two mugs, each with a price tag of $300. The left mug has only the $300 price tag, while the right mug's tag has $1,000 crossed out, showing $300 as the new price. A stick figure below points to the right mug, saying, "That's like free money!

Where this bias occurs

Imagine you’re out shopping for a present for a friend. You find a pair of earrings that you know they’d love, but they cost $100, way more than you budgeted for. After putting the expensive earrings back, you find a necklace for $75—still over your budget, but hey, it’s cheaper than the earrings! You buy them and make your way out of the mall.

As you’re leaving, you see a fun t-shirt hanging in a store window that your friend would really love, and it’s only $30. Why did you jump so quickly to buy the necklace instead of shopping around for other gift options? Because the initial price of the earrings became your anchor point for evaluating subsequent pricing information, shifting your perspective on what constitutes a good deal. The $100 established a clear price point in your mind. As a result, you evaluated the $75 necklace in relation to this set price point instead of looking at the cost objectively—the necklace seemed like a steal compared to the cost of the earrings! If you had encountered the necklace first, you would have been less inclined to buy it, instead holding out something in your budget like that awesome t-shirt.

Related Biases

Sources

  1. Lovallo, D., & Kahneman, D. (2003, July). Delusions of success: How optimism undermines executives’ decisions. Harvard Business Review. https://hbr.org/2003/07/delusions-of-success-how-optimism-undermines-executives-decisions
  2. Chapman, G. B., & Bornstein, B. H. (1996). The more you ask for, the more you get: Anchoring in personal injury verdicts. Applied Cognitive Psychology, 10(6), 519-540. https://doi.org/10.1002/(sici)1099-0720(199612)10:6<519::aid-acp417>3.0.co;2-5
  3. Enough, B., & Mussweiler, T. (2001). Sentencing under uncertainty: Anchoring effects in the courtroom. Journal of Applied Social Psychology, 31(7), 1535-1551. https://doi.org/10.1111/j.1559-1816.2001.tb02687.x
  4. Furnham, A., & Boo, H. C. (2011). A literature review of anchoring bias. The Journal of Socio-Economics, 40(1), 35-42. https://doi.org/10.1016/j.socec.2010.10.008
  5. Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1131. https://doi.org/10.21236/ad0767426 
  6. Epley, N., & Gilovich, T. (2002). Putting adjustment back in the anchoring and adjustment heuristic. Heuristics and Biases, 12(5), 139-149. https://doi.org/10.1017/cbo9780511808098.009
  7. Strack, F., & Mussweiler, T. (1997). Explaining the enigmatic anchoring effect: Mechanisms of selective accessibility. Journal of Personality and Social Psychology, 73(3), 437-446. https://doi.org/10.1037/0022-3514.73.3.437
  8. Englich, B., & Soder, K. (2009). Moody experts—How mood and expertise influence judgmental anchoring. Judgment and Decision making, 4(1), 41.
  9. Ariely, D., Loewenstein, G., & Prelec, D. (2006). Tom Sawyer and the construction of value. The Construction of Preference, 60, 271-281. https://doi.org/10.1017/cbo9780511618031.015
  10. Mussweiler, T., Strack, F., & Pfeiffer, T. (2000). Overcoming the inevitable anchoring effect: Considering the opposite compensates for selective accessibility. Personality and Social Psychology Bulletin, 26(9), 1142-1150. https://doi.org/10.1177/01461672002611010
  11. Zenko, M. (2018, October 19). Leaders can make really dumb decisions. This exercise can fix that. Fortune. https://fortune.com/2018/10/19/red-teams-decision-making-leadership/
  12. Enough, B., & Mussweiler, T. (2001). Sentencing under uncertainty: Anchoring effects in the Courtroom1. Journal of Applied Social Psychology, 31(7), 1535-1551. https://doi.org/10.1111/j.1559-1816.2001.tb02687.x
  13. Marchiori, D., Papies, E. K., & Klein, O. (2014). The portion size effect on food intake. An anchoring and adjustment process? Appetite, 81, 108-115. https://doi.org/10.1016/j.appet.2014.06.018
  14. Rastogi, C., Zhang, Y., Wei, D., Varshney, K. R., Dhurandhar, A., & Tomsett, R. (2022). Deciding fast and slow: The role of cognitive biases in AI-assisted decision-making. Proceedings of the ACM on Human-Computer Interaction, 6(CSCW1), 1–22. https://doi.org/10.1145/3512930 
  15. Nicholas Epley and Thomas Gilovich. 2006. The Anchoring-and-Adjustment Heuristic: Why the Adjustments Are Insufficient. Psychological Science 17, 4 (2006), 311–318. https://doi.org/10.1111/j.1467-9280.2006.01704.x PMID: 16623688 
  16. Epley, N., & Gilovich, T. (2006). The anchoring-and-adjustment heuristic. Psychological Science, 17(4), 311–318. https://doi.org/10.1111/j.1467-9280.2006.01704.x
  17. Hayes, A. (2021, May 29). Anchoring in investing: Overview and examples. Investopedia. Retrieved from https://www.investopedia.com/terms/a/anchoring.asp 
  18. PON Staff. (2024, July 18). The anchoring effect and how it can impact your negotiation. Program on Negotiation at Harvard Law School. Retrieved from https://www.pon.harvard.edu/daily/negotiation-skills-daily/the-drawbacks-of-goals/
  19. Kerr, N. L., MacCoun, R. J., & Kramer, G. P. (1996). Bias in judgment: Comparing individuals and groups. Psychological Review, 103(4), 687–719. https://doi.org/10.1037/0033-295X.103.4.687
  20. Etchells, E. (2015). Anchoring bias with critical implications. PSNet. Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services. Retrieved from https://psnet.ahrq.gov/web-mm/anchoring-bias-critical-implications 
  21. Ly, D. P., Shekelle, P. G., & Song, Z. (2023). Evidence for anchoring bias during physician decision-making. JAMA Internal Medicine, 183(8), 818–823. https://doi.org/10.1001/jamainternmed.2023.2366 
  22. Saposnik, G., Redelmeier, D., Ruff, C. C., et al. (2016). Cognitive biases associated with medical decisions: A systematic review. BMC Med Inform and Decis Mak, 16, 138. https://doi.org/10.1186/s12911-016-0377-1 
  23. Moritz, B. (2023, November). The anchoring bias in sales and marketing. MX Moritz. https://www.mxmoritz.com/article/the-anchoring-bias-in-sales-and-marketing/

About the Authors

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Dan Pilat

Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.

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Dr. Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. A decision scientist with a PhD in Decision Neuroscience from McGill University, Sekoul's work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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