principlebeginnerconcrete

Anchoring Effect

The tendency to rely too heavily on the first piece of information encountered (the anchor) when making decisions, even when it's arbitrary or irrelevant.

In Depth

When estimating unknown quantities, people start from an initial value and adjust insufficiently from it. The anchor can be completely random—asking whether Gandhi died before or after age 140 produces higher age estimates than asking about age 40. This effect is remarkably robust: it persists even when people are warned about it, incentivized for accuracy, and recognize the anchor is uninformative. In negotiations, whoever makes the first offer sets an anchor that pulls the final agreement toward it.

Example

A real estate agent's listing price anchors buyers' valuations. In salary negotiations, the first number mentioned (whether by employer or candidate) sets an anchor that influences the final offer, even when both parties know the anchor is just an opening position.

Common Misconception

Being aware of anchoring protects you from it—research shows the effect persists even with awareness and explicit warnings.

Source

Thinking, Fast and Slow

Daniel Kahneman

behavioral economicsdecision-makingnegotiation

Related Concepts

builds on

System 1 Thinking

Fast, automatic, unconscious cognitive processing that operates through pattern recognition and associative memory without deliberate effort.

Test Your Understanding

active recallhard

What makes the anchoring effect particularly concerning for decision-making?

applicationmedium

In a salary negotiation, you're the candidate. The employer asks what salary you're looking for. Should you name a number first, and why?