Anchoring bias (also called the anchoring effect) is the tendency to rely too heavily on the first piece of information encountered — the "anchor" — when making subsequent judgements or estimates. Even when the anchor is arbitrary, irrelevant, or clearly manipulated, it exerts a persistent pull on all subsequent thinking in a domain.

The effect was documented by psychologists Amos Tversky and Daniel Kahneman in their foundational work on heuristics and biases. In one demonstration, participants were asked to spin a wheel of fortune (rigged to stop at either 10 or 65) and then estimate what percentage of African countries were members of the United Nations. Those who spun 65 gave estimates roughly 25 percentage points higher than those who spun 10 — despite the wheel being transparently random and having no connection to the question. The anchor shaped the answer even when everyone knew it should not.

How Anchoring Works

When presented with an anchor and asked to estimate an unknown quantity, we tend to start from the anchor value and adjust — but the adjustment is almost always insufficient. The final estimate stays closer to the anchor than the truth warrants.

Several mechanisms contribute to this:

• Insufficient adjustment. We adjust away from the anchor but stop too soon, leaving the estimate anchored in the wrong region of the number line.
• Selective accessibility. An anchor makes anchor-consistent information more cognitively available. Thinking "is the answer higher or lower than 65?" activates more information consistent with 65 than information far from it.
• Conversational norms. In a social context, an anchor set by another party is often treated as a reasonable starting point even when it is not — because ignoring it entirely feels impolite or irrational.

Anchoring in Negotiation and Pricing

Anchoring is one of the most deliberately exploited cognitive biases in commercial contexts:

• Retail pricing: "Was £120, now £75" uses the original price as an anchor to make the sale price feel like a bargain, regardless of what the item is actually worth.
• Salary negotiation: Whichever party names a number first sets the anchor for the entire negotiation. A high opening offer tends to produce a higher final settlement than a low one, even after extensive negotiation.
• Real estate: Asking prices anchor buyers' perceptions of value. Research consistently shows that listing prices influence final sale prices even when the listing price is arbitrary.
• Legal damages: In mock jury studies, higher damages claims by plaintiffs produce higher awards, even when juries are instructed to disregard them.

Anchoring Beyond Numbers

The anchor effect is not limited to numerical estimates. It applies to qualitative assessments as well. A first impression of a person — formed from an initial description or brief encounter — acts as an anchor that shapes how subsequent information about them is interpreted. Positive anchors make positive information more salient; negative anchors do the reverse.

In performance evaluation, the order in which a manager encounters an employee's work can shift the evaluation substantially. Excellent work seen after mediocre work looks better than excellent work seen after outstanding work — a version of anchoring combined with contrast effects.

How to Counteract Anchoring Bias

• Generate your own estimate first. Before encountering any anchor, form your own independent assessment of the value. This gives you a reference point that is not contaminated by the incoming anchor.
• Consider the anchor's source. Ask whether the anchor is based on any genuine information about the value in question, or whether it is arbitrary. If arbitrary, make a conscious effort to move further from it.
• Make adjustments more aggressively. Research suggests that deliberate overcorrection — consciously adjusting further than feels right — produces more accurate estimates because natural adjustment is systematically insufficient.
• In negotiations, name first when you have information. Setting the anchor is a strategic advantage when you have researched the actual value and can set an anchor that is extreme but defensible.

Practise in Context

Anchoring appears frequently in scenarios involving prices, estimates, and evaluations. Practise identifying it in the Dojo and explore how it connects to the Halo Effect and Availability Heuristic in the Library.