Anchoring in a Nutshell
Any information which we use as a reference point for our decisions can powerfully distort our thinking and decision making. One example of such reference points are anchors, and research shows that anything in the decision-making process, even arbitrary numbers, can serve as anchors.
Anchoring can have especially damaging effects on our decisions in negotiations when the other party makes the first offer. First offers are naturally most likely to be used as anchors, and they will have even greater effect if they are presented as very specific numbers which lead us to think in smaller denominations.
Research on Anchoring
In the classical experiment by Amos Tversky and Daniel Kahneman (1974) participants had to guess the percentage of African nations that were members of the United Nations. Some people were asked whether it was more or less than 10%; others were asked whether it was more or less than 65%.
The question that participants heard served as the anchor – an initial and unconscious suggestion from which participants would adjust their answer. Thus, the participants who were asked whether it was more or less than 10% answered on average 25%; the participants who were asked whether it was more or less than 65% answered on average 45%.
In a relatively more recent experiment by Fritz Strak and Thomas Mussweiler (1997), the researchers asked participants to guess how old Gandhi was when he died. Some people were asked whether Gandhi died before or after age of 140; although the question was obviously off the mark with his possibly real age when died, this group was still influenced by the question – they answered on average that Gandhi died when he was 67 years old. Others were asked whether he died before or after age of 9; the estimates of this group were on average lower 17 years, i.e. that Gandhi died when he was 50 years.
Anchoring and Adjustment: Power of Precise Numbers
People’s ultimate decisions are based on anchors but do not match them. Instead, people normally use anchors to adjust their answer. However, some anchors create a much weaker adjustment.
One factor creating small adjustment is the precision of the anchor. For example, in a study by Janiszewski and Uy (2008), home sellers received more when they used precise numbers (e.g. “$282.600”) instead of rounded numbers (e.g. “$280.000”). The main reason for this effect is that precise numbers encourage people to think in smaller denominations – hundreds instead of thousands. Therefore, the buyers were willing to pay more for the property because they were adjusting less from the initial anchor.
- Tversky, A. & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1130
- Strack, F., & Mussweiler, T. (1997). Explaining the enigmatic anchoring effect: Mechanisms of selective accessibility. Journal of Personality and Social Psychology, 73, 437–446.
- Janiszewski, C., & Uy, D. (2008). Precision of the anchor influences the amount of adjustment. Psychological Science, 19, 121-127.