17.5: Anchoring and Adjustment

• Estimate the percentage of African countries in the United Nations (how much is it above, or below, 10%)?

The average response here is about 25% (the correct answer is 35%). But if you ask another group of people to:

• Estimate the percentage of African countries in the United Nations (how much is it above, or below, 65%)?

the average response is about 45%. Why?

In the first case, most people think that 10% is too low, but they still begin with that figure and adjust up (to 25%) from it. In the second case people feel that 65% is too high, but they still begin with that figure and adjust downward (to 45%) from it. In each case their original starting point—10% or 65%—provides a reference point or anchor. We begin with this anchor and adjust up or down, but frequently we don’t adjust enough. When we don’t, the anchor has a strong effect on the judgment that they make. An anchoring and adjustment bias occurs when we don’t adjust (up or down) enough from an original starting value or “anchor”.

The anchor we use might be determined by the wording of questions or instructions, as it was above. But in different cases there will be different natural anchors that we’ll tend to use.

Estimate, within 5 seconds, the product of:

8 x 7 x 6 x 5 x 4 x 3 x 2 x 1.

In experiments, the median response is about 2,250. But if you instead ask people to quickly estimate the product of:

1 x 2 x 3 x 4 x 5 x 6 x 7 x 8,

the median response is about 512. It appears that people perform just a few of the multiplications, anchor on the result, and adjust upward from there. In the first case the product of the first two or three digits is larger, so we adjust upward from a larger anchor and arrive at a larger number than we do in the second case. In this case, neither anchor leads to a very accurate answer (the correct answer is 40,320).

Anchoring Effects can be Very Strong

Anchoring effects can occur even when anchoring values are known to be entirely arbitrary, when they are ridiculously extreme, and when people are paid money for making correct estimates and predictions.

In the study that used our first example (involving the percentage of African nations in the United Nations), the anchor values were set by having each subject spin a wheel much like the one on Wheel of Fortune (it was rigged to stop at either 10% or 65%). So, 10% or 65% served as anchors for the subjects, even though they believed these numbers were completely arbitrary. But these anchors still had a strong impact on their estimates (in the 10% group the estimate was 25% and in the 65% group it was 45%).

Anchoring effects also occur when anchoring values are outlandishly high or low. When a group of psychologists asked subjects to estimate the number of Beatles records that made the Top Ten after first asking them if the number was less than 100,025, they found that this ridiculously high number served as an anchor and led subjects to give a high estimate (though not, of course, one anywhere near as high as the anchor itself). Even when people are offered money for doing well, they remain susceptible to anchoring biases, and even the predictions of many expert forecasters will be influenced by arbitrary anchor values.

Anchoring and Adjustment in the Real World

In many cases, the current situation—the way things presently are, the status quo—provides an anchor. In other cases, first impressions provide an anchor. This may help explain the strength of the primacy effect. And some people think that anchoring helps explain hindsight bias (the tendency after the fact to think that we knew it all along). In hindsight, we are anchored to what we know about how things turned out, and it’s hard to think back and accurately reconstruct how we thoughts about things before we learned what the outcome was.

We can fall prey to an anchoring bias any time examples or numbers are used to provide a frame of reference (“Estimate the number of people who live in Oklahoma; for example, is it between three million and four million?”). Often this happens without anyone intending to bias our judgments.

But whenever people are susceptible to a bias, there will be people who have learned to exploit that susceptibility. For example, experienced negotiators or people collecting for charities will often begin with extreme demands or requests in hopes of setting extreme anchors. Everyone knows that adjustments will be made in the direction of less extreme demands, but the more extreme the anchor, the greater its capacity to lead to an outcome closer to the one the negotiator wants. Similar points apply when two people are haggling over a price. Other people in the persuasion professions, e.g., auctioneers and advertisers, can also exploit our susceptibility to anchoring effects by staking out extreme positions.

Safeguards

The most difficult thing is realizing that we are being influenced by an anchor at all. So, the first step is to get in the habit of thinking about predictions and negotiations in terms of anchoring and adjustment. Once we do, we can look out for anchor values that seem too high or too low. We can also escape the power of anchors to color our thinking by considering several rather different anchor values. And if someone proposes an extreme anchor, counter with another anchor at the opposite extreme.