“The anchoring effect: the first number you see, even if you know it to be arbitrary, will have a disproportionate influence on your estimate. People make estimates by starting with an initial value and adjusting it. Adjustments are typically too small.”
—
Daniel Kahneman
Thinking, Fast and Slow (2011); originally Kahneman & Tversky, Judgment Under Uncertainty (1974)
Commentary
Anchoring demonstrates that our estimates are irrational—not in the sense of being illogical, but in being unduly influenced by irrelevant information. Show someone a random number, then ask for an estimate; the random number influences the estimate.
This has practical implications: salary negotiations (the first offer anchors), real estate pricing, negotiations generally. It's also theoretically significant: it shows that System 1 (automatic processing) dominates, and adjustments by System 2 are insufficient. Awareness of the bias doesn't eliminate it.
Commentary
Anchoring demonstrates that our estimates are irrational—not in the sense of being illogical, but in being unduly influenced by irrelevant information. Show someone a random number, then ask for an estimate; the random number influences the estimate.
This has practical implications: salary negotiations (the first offer anchors), real estate pricing, negotiations generally. It's also theoretically significant: it shows that System 1 (automatic processing) dominates, and adjustments by System 2 are insufficient. Awareness of the bias doesn't eliminate it.