Anchoring

August 21, 2013 |  by

Mind manipulations are like magic. Anchoring is the tendency to rely too heavily on an initial piece of information in making decisions.

In a 1974 study by Daniel Kahneman and Amos Tversky (reported in Wikipedia):

…participants were asked to compute the product of the numbers one through eight, either as 1 \times 2 \times 3 \times 4 \times 5 \times 6 \times 7 \times 8 or reversed as 8 \times 7 \times 6 \times 5 \times 4 \times 3 \times 2 \times 1. The anchor was the number shown first in the sequence, either 1 or 8. When 1 was the anchor, the average estimate was 512; when 8 was the anchor, the average estimate was 2,250.

A 1997 study tested anchoring on Gandhi’s age at death. Subjects were first asked whether Gandhi lived beyond age 9, or whether Gandhi lived beyond age 140. Subjects were then asked to guess his age at death. The “9” group’s average guess was 50. The “140” group’s average was 67.

Two more examples, from Kahneman’s Thinking Fast and Slow:

German judges with an average of more than fifteen years of experience on the bench first read a description of a woman who had been caught shoplifting, then rolled a pair of dice that were loaded so every roll resulted in either a 3 or a 9. As soon as the dice came to a stop, the judges…were instructed to specify the exact prison sentence they would give to the shoplifter. On average, those who had rolled a 9 said they would sentence her to 8 months; those who rolled a 3 said they would sentence her to 5 months.

A few years ago, supermarket shoppers in Sioux City, Iowa, encountered a sales promotion for Campbell’s soup at about 10% off the regular price. On some days, a sign on the shelf said “limit of 12 per person.” On other days, the sign said no limit per person. Shoppers purchased an average of 7 cans when the limit was in force, twice as many as they bought when the limit was removed.

Anchoring affects charitable donations too. When no suggested donation (anchor) was mentioned, visitors at San Francisco Exploratorium were willing to give $64 on average (to save birds from oil spills). When the suggested donation was $5, contributions averaged $20. When the suggested donation was $400, the willingness to pay averaged $143.

Anchoring can be measured. The difference between high and low offers/estimates/donations is divided by the difference between high and low anchors. The result is the anchoring effect. In the donation example above:

(143-20)/(400-5) = .31, or 31%

Researchers have found anchoring effects of 50% to be common. Meaning a person’s offer/estimate can be swayed by 50% just by giving them anchors!

Clearly, using anchoring in negotiation is valuable.

Take a rough example. You’re purchasing an expensive watch. You say to the seller, “You know, in Guatemala, watches sell for 5 dollars.” You’ve introduced an anchor (and the idea that expensive watches are overpriced). The low anchor is then associated with the watch at hand.

Precise anchors affect not only value but also scale of adjustment. In a 2008 study by Janiszewski and Uy found that:

[Buyers] read an initial price for a beach house, then gave the price they thought it was worth. They received either a general, seemingly nonspecific anchor ($800,000) or a more precise anchor ($799,800). [Buyers] with a general anchor [bid lower] than those given a precise anchor ($751,867 vs $784,671). The anchor affects not only the starting value, but also the starting scale. When given a general anchor of $20, people will adjust in large increments ($19, $21, etc.), but when given a more specific anchor like $19.85, people will adjust on a lower scale ($19.75, $19.95, etc.). Thus, a more specific initial price will tend to result in a final price closer to the initial one (Wikipedia).

Anchoring is just a form of priming. Of creating associations in the mind. Anchoring is stronger when people are tired, or their mental resources are depleted. That’s when automatic associations take over.

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