The Psychology Behind “Anchoring” and Why It’s Important to Know.

How Anchoring Affects Your Decisions.
In our everyday lives, we are faced with multiple decisions. These decisions can be small, like what we are going to eat for lunch, or they can be large, like whether you should buy a house. Most of us tend to think that we are rational in our decision making, and our choices are based on sound judgment. However, the truth is that there are many factors that influence our decisions, many of which we aren’t fully aware of. One of these factors that can arise in cases where we bargain with someone else is a concept known in psychology as “anchoring”. Given that some of the larger decisions we make in life take place during bargaining, like whether to purchase a large expense like a house or a car, being aware of how anchoring affects your decision making may be very helpful.
Here are two similar questions:
· Was Leonardo Da Vinci more or less than 130 years old when he died?
· How old was Leonardo Da Vinci when he died?
The fact is that Leonardo Da Vinci died at sixty-seven. Not too hard to believe. If I had asked you the second question, you may have guessed somewhere near there, perhaps something close to seventy. However, if I asked you if he was more or less 130 years old when he died, you may not know it, but the number 130 influences your answer. Our brain tends to latch on to the number 130 as an “anchor” and the number unknowingly drags our answer closer to that number. So, your answer to the first question may be higher than it would be for the second question because the number 130 drags your answer closer to that number. You might answer somewhere closer to eighty or ninety for the first question, compared to the seventy in the second question.
One study had people play a game of wheel of fortune, where the wheel was rigged to either fall on the numbers 10 or 65. After spinning the wheel, the people in the study wrote down the number their spin was rigged to fall on (10 or 65) and were asked two questions:
· Is the percentage of African nations among the UN members larger or smaller than the number you just wrote?
· What is your best guess of the percentage of African nations in the UN?
People who spun a 10 in the wheel of fortune game gave an averaged answer of 25% to the second question. However, people who spun a 65 in the wheel of fortune game gave an average answer of 45% to the second question. In this case, the higher number (65) worked as an anchor and biased the people’s answers to a higher percentage closer to the number their brains had recently been exposed to in the wheel of fortune game.
This study and many others suggest that information and stimuli in the external environment are much more influential in our decision making than we may be aware of. When we make decisions, we aren’t necessarily in full control of how we make our decision but are highly susceptible to influences that affect us in ways that we are completely oblivious about. If it’s a Friday afternoon and you are making plans with your friends, they may suggest that you meet for drinks at 10:00 pm. You protest, saying that 10:00 pm is too late and that 9:00 would be a better time for you. However, you eventually realize that the time that best suits your personal schedule would be closer to 8:00 pm, but your friends 10:00 pm suggestion dragged your preferred time up by an hour! Who knows what time you’ll make it to your warm bed now?
More important decisions than what time you will meet for drinks can be influenced by anchoring. In situations where you are buying a new car, the salesman may start the bargain by mentioning a specific starting price. In this case, your mind will unconsciously be influenced by the number they mention. Even if you think their number is too high and you bring it down, you may not bring it down as low and offer as small a counter-offer than if they hadn’t begun the bargain with the price they initially offered. Being aware of how the first proposal of a price can influence your response in a bargaining situation can help you bargain more efficiently during a purchase.
Our minds are delicate things. They can perform impressive tasks, but there is a limit and sometimes our minds become spent with their limited capacity when they’ve been exhausted. When our mental energy is limited, our decision making becomes more biased and lazy. It is especially in these circumstances that we are more susceptible to biases like anchoring in our decision making. Being aware of how this cognitive bias works will leave us more equipped to make better decisions and be better at bargaining.