The tendency to rely too heavily on the first piece of information encountered (the anchor) when making decisions, even when it's arbitrary or irrelevant.
When estimating unknown quantities, people start from an initial value and adjust insufficiently from it. The anchor can be completely random—asking whether Gandhi died before or after age 140 produces higher age estimates than asking about age 40. This effect is remarkably robust: it persists even when people are warned about it, incentivized for accuracy, and recognize the anchor is uninformative. In negotiations, whoever makes the first offer sets an anchor that pulls the final agreement toward it.
A real estate agent's listing price anchors buyers' valuations. In salary negotiations, the first number mentioned (whether by employer or candidate) sets an anchor that influences the final offer, even when both parties know the anchor is just an opening position.
Being aware of anchoring protects you from it—research shows the effect persists even with awareness and explicit warnings.
What makes the anchoring effect particularly concerning for decision-making?
In a salary negotiation, you're the candidate. The employer asks what salary you're looking for. Should you name a number first, and why?
Logically equivalent choices produce different decisions when framed differently (as gains vs. losses, or with different reference points).
PrincipleContinuing an endeavor because of previously invested resources (time, money, effort) that cannot be recovered, even when continuing is irrational.
PrincipleFast, automatic, unconscious cognitive processing that operates through pattern recognition and associative memory without deliberate effort.
Mental ModelSlow, effortful, conscious cognitive processing required for complex calculations, unfamiliar tasks, and deliberate reasoning.
Mental ModelJudging the frequency or probability of events by how easily examples come to mind, leading to overestimation of vivid, recent, or emotional events.
PrincipleJudging probability by similarity to stereotypes or prototypes, while ignoring base rates and sample size.
PrincipleWhen faced with a difficult question, System 1 automatically substitutes an easier question without conscious awareness of the switch.
FrameworkLosses hurt approximately twice as much as equivalent gains feel good, making people risk-averse for gains and risk-seeking for losses.
PrincipleThe tendency to rely too heavily on the first piece of information encountered (the anchor) when making decisions, even when it's arbitrary or irrelevant.
A real estate agent's listing price anchors buyers' valuations. In salary negotiations, the first number mentioned (whether by employer or candidate) sets an anchor that influences the final offer, even when both parties know the anchor is just an opening position.
Being aware of anchoring protects you from it—research shows the effect persists even with awareness and explicit warnings.
Anchoring Effect is explored in depth in "Thinking, Fast and Slow" by Daniel Kahneman. Distilo provides a deep AI-powered analysis with key insights, audio narration, and practical frameworks.