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Logical Fallacies / Cognitive Biases / Anchoring Bias
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Anchoring Bias

Decision-Making Bias
The tendency to rely too heavily on the first piece of information encountered when making decisions.

Example of Anchoring Bias

  • A job candidate is asked about their salary expectations. They mention $80,000, and all subsequent negotiations revolve around that figure, even though the role might have been budgeted for $100,000. The initial number anchored the negotiation, potentially costing the candidate thousands of dollars.
  • A store marks a jacket as "Originally $200, now $100." Shoppers perceive this as a great deal, even though the jacket was never actually sold at $200. The artificial high anchor makes the current price seem like a bargain.

Note

First documented by Amos Tversky and Daniel Kahneman in 1974 as part of their research on heuristics and biases.

This is a common bias

Anchoring Bias

Extended Explanation

Anchoring Bias is a cognitive bias in which people rely too heavily on an initial piece of information—the "anchor"—when making subsequent judgments and decisions. Once an anchor is set, people tend to adjust their estimates insufficiently from that starting point, even when the anchor is arbitrary or irrelevant to the decision at hand.

This bias is particularly powerful in negotiations and pricing. When a seller sets a high initial price, buyers' counteroffers tend to be higher than if the initial price had been lower, even if both parties know the first price was unreasonable. Real estate agents, car salespeople, and retailers regularly exploit anchoring by setting high initial prices to make subsequent offers seem more reasonable by comparison.

Anchoring affects even experts in their fields. Studies have shown that experienced judges give different sentences based on random numbers they were exposed to before sentencing, and real estate agents' property valuations are influenced by arbitrary listing prices. The bias persists even when people are warned about it and try to correct for it, demonstrating how deeply ingrained this mental shortcut is.

To mitigate anchoring bias, it helps to consciously consider whether an initial value should influence your judgment. Generating your own estimate before being exposed to others' numbers, considering a range of possible values, and actively questioning the relevance of anchor values can all help reduce this bias's impact on decision-making.