This means the information remains easily accessible, influencing our behavior without us realizing it. To put it simply, when we are exposed to first information, being it a number, price, or any other concept, the areas of the brain related to that information remain active to some extent. See how easy it is to skew your judgment via article? Imagine what businesses could do when they try really hard.Īnother explanation is called the selective accessibility hypothesis.

Your friend (assuming it wasn’t a random stranger) got to adjust her/his estimate around a different reference point. You adjusted your estimate around the first piece of information you got. How many liters of diesel does it take to fill up a jumbo jet? Would you say it’s more or less than 100 000? How much exactly? Now, tap the shoulder of the first person you can find and ask the person a slightly different question: How many liters of jet fuel do you think you need to fill up a tank of a jumbo jet? Is it more or less than 1 000? How much exactly? Write down your answer. Let’s explain it in the example – try to answer this question: Anchoring bias takes place when the adjustments are too small, which, they usually are. Whenever we try to make predictions, we start with some initial value and then try to adjust it. It’s called the anchor-and-adjust hypothesis. This is basically the first explanation of anchoring bias that comes from the OG behavioral economists themselves – Daniel Kahneman and Amos Tversky. Then, we adjust our estimate around that reference point. To estimate a price or a choice, we need to have a reference point. We don’t know if the price is too high or not or if the decision is right or wrong without any context. It’s pretty straightforward – we cant make decisions in a vacuum. You hope they get over it someday, but they won’t. The truth is you can spot the anchoring bias at least a couple of times every day, whether it’s a discount that anchors you at a higher price and then satisfies you with a lower one, or your parents constantly grumbling about how everything used to be cheaper back in their days. See? Even if the price was the same – $150, the first information you get significantly affects your decisions. Well, yeah, you think, but it’s not $50.The $75 model suddenly doesn’t look that great. He convinces you the pair is brand-new and made with the latest footwear technology, unlike the online model. The salesman shows you a similar-looking pair for $150. The first information you get significantly affects your decisions.īut when you walk into the store, you find out it’s sold out. You’re pretty sure the Nike store is nearby, so you decide to go there to try on the shoes in person and then buy them. In scenario 2, you’re casually surfing the web and you find a pair of shoes you like for $100. It’s a no-brainer and you instantly buy the second pair. You walk to the other rack and find almost exactly the same-looking pair of shoes for just $150. You love the look of the very first pair you see is, with a price tag of $200. In scenario 1, you walk into a Nike store with the intention of buying a new pair of shoes.

The anchoring bias