Decision making is a complex paradigm that can be influenced in many ways. One of those ways is the Anchoring Bias. The Anchoring Bias is our natural tendency to rely too heavily on the first piece of information we encounter. This ‘anchor’ can heavily influence our ability to make decisions.
First explored by Amos Tversky and Daniel Kahneman in 1974, anchoring plays a large role in how we judge value. The traditional approach is to assign an initial estimate or reference value and then adjust that reference to arrive at what we deem fair. The problem is these adjustments are often insufficient.
Not only that, but anchoring also greatly impacts our judgment of value on top of everything else. This is well illustrated by several experiments that demonstrate this cognitive bias.
In one study by Tversky and Kahneman, participants were asked to estimate the percentage of African countries that were part of the United Nations. Prior to making their guesses, participants first encountered a roulette wheel that was rigged to stop on either 10 or 65. This served as the arbitrary anchor in the experiment. Participants whose wheel stopped on 10 guessed lower (~ 25%) than participants whose wheel stopped on 65 (~ 45%).
As observed by Tversky and Kahneman, “different starting points yield different…
