Anchoring bias: what it is and how it influences the human mind

Anchoring bias is the psychological process by which we trust our first impressions too much.

When we use the word bias, we refer to something inaccurate or that lacks logic, biased information, is information where we only know part of the truth. Cognitive biases are described as psychological processes that make us irrationally interpret the information received, this lack of logic or partiality when thinking can lead us to make erroneous judgments and make interpretations that lack meaning or illogical.

Although they are a distortion in our way of thinking, cognitive biases are present in our daily lives; we use them in the framework of our social interactions and decision making, the anchoring bias is the bias by which it is difficult to get rid of the first impression. In this article we will see what is the anchoring bias and we will expose its main consequences in decision making.

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What is anchoring bias?

As we have seen, there are different types of cognitive biases, which sometimes make us make poor decisions, among them, the anchoring bias, in English, anchoring.

The anchor bias is the tendency we have to start from a specific piece of data (the anchor) to make a decision or give an answer. When we do not have enough information, we tend to look for an anchor that serves as a guide, even when it means going against logic. For example, when determining an amount about which we are not sure, we take as a point reference the most recent figure we have heard, regardless of whether it is relevant or not.

Anchoring bias is important in markdowns. To decide if a shirt is cheap or expensive, we do not do a detailed study on: the quality of the fabric, the manufacturing process, the production cost of the country in which it was made, etc. instead, we estimate whether a shirt is cheap or expensive based on the price it had before it was marked down.

Anchoring bias is the principle of marketingg that underlies all sales campaigns, including Black Friday, as we see, is based on telling consumers how much a certain product costs before finally offering an important discount. That is why, it is said, that some companies raise prices just before sales. The perception of the value of the product, in this case, is the result of the anchoring bias and little else.

This bias can also be used in the world of politics, for example, if it is known that unemployment is going to be higher than expected, an even higher figure may be announced ahead of official data, to consider the final result as good.

By focusing on a first information, a first value or a first element, it is more difficult for the mind to take into account new information, new values ​​or consider other options. The anchoring bias does not only exist in the sales and, in addition, we ourselves are more aware of its existence than we think; We care much more about being punctual the first days of work because we know that if we are late the first working day, we are likely to earn the label of late and this label will be very difficult to put off.

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Studies on anchoring bias

The anchoring effect was first theorized in the 1970s by behavioral, financial, and cognitive psychologists, Daniel Kahneman and Amos Tversky. Kahneman and Tversky were interested in how people form judgments when they are not sure of the facts, so they conducted several studies. His works and books on cognitive biases, including the well-known think fast, think slow, have become references in the field of cognitive psychology and many specialists follow their path today. The idea of ​​anchoring bias first appeared in a 1974 article titled Judgment under Uncertainty: Heuristics and Biases.

One of the patterns that Kahneman and Tversky discovered was the persistence of the anchoring bias, even when tells people that the information they have just provided is completely false or has no relevance, these they continue to take them into account when making a decision or estimating a figure.

An experiment by James Montier, author and specialist in behavioral finance, highlighted the influence of the anchoring bias when estimating figures. A group of people were asked two clearly unrelated questions involving numbers. In the first, they were asked to say the last 4 digits of their phone number. Next, they were asked if they thought the number of physicists in London was more or less than that figure, and then asked for an estimate.

The results confirmed the influence of the first figure (the telephone number) in the estimation. Participants with a phone number ending above 7,000 responded that there must be about 8,000 physicists in London. Those with a telephone number below 3,000 estimated that London had around 4,000 physicists.

James Montier also delved into the study of this bias in the world of trading, and how financial analysts are heavily influenced by past events or opinions on their current investments; such as over-relying on stocks they've already made a profit on, even if their investment conclusions contradict objective market data.

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Why does anchoring bias occur?

After understanding what it is, we can expose that the anchoring bias is produced both by anchors that we have just met, for example, in purchases impulsive in the sale, as anchors that happened long ago, these are first impressions or past good luck in the world of trading.

A plausible explanation of first impressions is the primacy effect. According to this effect, people tend to remember things they learn first better, and tend to forget information they receive later more easily. For example, when remembering a list it is easier to remember the first and last elements than those in the middle. This phenomenon responds to different reasons:

1. The repetition

People tend to repeat the items on the list when given the information, if people are told not to repeat items, the primacy effect disappears. If you are late on the first day of class, it is likely that history will repeat itself in the teacher's mind or become an anecdote; however, if the delay occurs on any given Tuesday in May, the story may not matter much to anyone.

2. attention span

Attention and focus play an important role in remembering items. Usually, we will pay more attention to the beginning and end of a monotonous presentation, as a list of items, so these are more likely to be remembered better.

3. The memory

We are not a powerful computer and our memory capacity is quite limited; if we think about it, we forget most things that happen to us. Only some of them go into our long-term memory and we can store others in our short-term memory, but most of them are not stored anywhere.

If people remember more the first information than the later, they are more likely to assume that this is more relevant than the information that comes to us later, often without even being aware of this psychological process.

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Its effects on the human mind

In cases where the anchor directly influences the answer given below. The anchoring bias could be explained, as Tversky and Kahneman proposed in their original study, by the adjustment that people make between it and the final answer. The intention of the people is to get away from the anchor, but when they want to get away from it, they still stay too close.

However, this theory is only valid if the anchor is close to the final answer. If we estimate the luxury price of a house in one euro, and then ask about its real value, this price will have no influence on the answer.

An alternative explanation to the anchoring phenomenon is "confirmatory hypothesis testing". The humans we are constantly judging and evaluating the information we receive; Obviously, this will also happen with the anchor. As soon as someone gives us an anchor and then asks us something else, even if it has nothing to do with it, We will evaluate if this is a possible answer, if it is not, we will think about how far or how close this. Therefore, the anchor will always influence the answer.

Recently, attitude change has been put forward as a possible explanation for the anchoring phenomenon. According to this proposal, the anchor influences people to be more favorable to him, this makes the responses more like the anchor.

The anchor can also be used consciously: if we are asked, for example, how much we think a car that has 20 more horsepower than ours will cost, we will use the value of ours as an anchor to estimate the price. Although, we have no idea of ​​the real cost of one more horse.

However, for some questions, having a starting point can help us filter and simplify the information, we cannot always start from scratch.

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Can anchoring bias be counteracted?

The anchoring bias seems difficult to counteract, since, like other biases, it responds to a need evolutionary, sometimes we can not interpret all the data to respond to stimuli in the most rational possible. The bias will be more accentuated in quick decisions or in stressful situations where we don't have time to process all the information.

Therefore, it is important not to make hasty decisions and try to collect a little information before giving an answer or taking action, when receiving new information.

It seems clear that the more we know about a subject, the less this bias will affect us. If we know that Istanbul is the largest city in Europe and has 14.6 million inhabitants, it is quite possible that cognitive bias does not affect us.

Kahneman proposes to counteract the effect of the anchor, discussing with it, for example, we can ask ourselves if they are real data, if there is some kind of prejudice, if there are interests behind them. Also, creating another anchor can help lessen the effect of the first one.