Anchoring describes the tendency to rely on initial information to “anchor” subsequent judgements and interpretations. Once the anchor is set, we are biased towards interpreting information around that anchor, even if we eventually discover the anchor to be incorrect or less relevant than the new information. If we are unable to re-anchor, the initial anchor will prevent us from making fully rational decisions based on an unbiased analysis.
The anchoring bias is especially pronounced in negotiations, where the first offer, the anchor, has a significant impact on the final agreement. For example, when bartering at a market, the initial price tagged on the item will influence your perception cheaper offers, even it is still much more what the item is really worth. As a result, you may end up buying that item thinking it was a huge bargain, when in reality, you anchored your perception around the initial higher price you saw.