This Post Could Change Your Life - The Anchoring Effect

While this article is a little more technical than usual, it is worth the read.

Researchers Amos Tversky and Daniel Kahneman hypothesized that initially presented, irrelevant numbers influence human judgment.  They called their hypothesis the “anchoring effect” and argued that “…people make estimates by starting from an initial value that is adjusted to yield the final answer…Adjustments are typically insufficient.  That is, different starting points yield different estimates, which are biased toward the initial value” (Tversky & Kahneman, 1974, p. 1129).  The outcome of their research has application to all aspects of daily life that includes numbers, such as the length of criminal sentences, medical diagnoses, and purchase decisions.  

The phenomenon of insufficient adjustment of initial values was tested with an experiment wherein subjects were asked to estimate various quantities in percentages.  After having been presented with a question, subjects spun a wheel of fortune.  They were then instructed to state whether the answer to the question was higher or lower than the number that came up on the wheel.  Finally, they estimated the answer to the question by moving up or down from the number the wheel produced.

In one particular trial, subjects were asked how many African countries belonged to the United Nations.  They were shown the numbers 10 and 65.  The median estimates for these respondents were 25% and 45% respectively.  Based on the fact that approximately 80% of all African countries belonged to the United Nations at the time, the majority of the respondents were estimating and not citing facts from memory.

The anchoring effect has many practical applications.  It changes outcomes in legal proceedings; medical diagnoses; and purchasing decisions, including major purchases such as real estate, as well as more minor consumer purchases (Smith, R., 2011, p. 110).  Besides proving the reality of the anchoring effect, the Tversky and Kahneman study suggests the impact of the anchoring effect is practically significant and warrants further investigation.  Specifically, the awareness of and ability to mitigate the anchoring effect can influence the outcome of daily events in profound ways.

Smith, A. (2011). Exploring the relationship between knowledge and anchoring effects: is the type of      knowledge important? (Doctoral Dissertation).  Retrieved from University of Iowa, Iowa Research Online (http://ir.uiowa.edu/etd/1264).

Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1130.

Example to come...