3.6:

3.6: The Anchoring-and-Adjustment Heuristic

The Anchoring-and-Adjustment Heuristic

JoVE Core
Social Psychology

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JoVE Core Social Psychology

The Anchoring-and-Adjustment Heuristic

3.5: The Representativeness Heuristic

3.7: Confirmation Biases

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01:25 min

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February 12, 2020

Overview

In order to make good decisions, we use our knowledge and our reasoning. Often, this knowledge and reasoning is sound and solid. However, sometimes, we are swayed by biases or by others manipulating a situation. For example, let’s say you and three friends wanted to rent a house and had a combined target budget of $1,600. The realtor shows you only very run-down houses for $1,600 and then shows you a very nice house for $2,000. Might you ask each person to pay more in rent to get the $2,000 home? Why would the realtor show you the run-down houses and the nice house? The realtor may be challenging your anchoring bias. An anchoring bias occurs when you focus on one piece of information when making a decision or solving a problem. In this case, you’re so focused on the amount of money you are willing to spend that you may not recognize what kinds of houses are available at that price point.

This text is adapted from OpenStax, Psychology. OpenStax CNX.

Transcript

When faced with uncertainty, someone may not realize that they rely on the very first piece of information they encounter, which can bias their judgment.

For example, a police officer pulls over a car for speeding. In this instance, the number posted on the speed limit sign serves as the initial anchor—the arbitrary starting point—in the driver’s mind. To make a final decision, he implicitly adjusts his estimate towards the anchor.

His strategy uses the anchoring-and-adjustment heuristic—the mental shortcut whereby judgments made to an unknown question or situation start with anchoring information—whether arbitrary, suggested, or partially computed—that is then adjusted to yield a final answer.

Here, the driver’s estimate was insufficient and led to an unpleasant outcome—receiving a speeding ticket. He’s now eager to replace his car.

After researching the average cost for a new one that he wants, he quickly accepts the salesman’s offer, given that the price is just below the initial amount he expected to pay.

Without further research, he overlooked the possibility that another dealer could offer a much lower price. Once again, he’s fallen prey to the anchoring bias!

He’s not alone; people have a tendency to stop adjusting soon after reaching a satisfactory value.

Key Terms and definitions

Anchoring bias - A cognitive bias focusing on initial information while decision-making.
Price Anchoring - The strategy to set initial price point used as a reference in negotiations.
Confirmation heuristic - The tendency to look for information that confirms pre-existing beliefs.
Adjustment heuristic - Mental shortcuts taken to quickly figure out a strategy or problem.
Heuristic - A rule of thumb strategy to find an approximate solution when exact solution is not possible.

Learning Objectives

Define Anchoring bias - Explain how it affects decision-making (e.g., anchoring example, psychology).
Contrast Price Anchoring vs Anchoring Bias - Define their key differences (e.g., price anchoring in realtor's example).
Explore examples - Examine confirmation heuristic (e.g., focusing on price point in renting decision).
Explain Mechanism of Adjustment Heuristic - Understand it's role in decision-making strategies.
Apply in Context - Illustrate how bias affects everyday decisions (e.g., expenditure decisions).

Questions that this video will help you answer

What is the anchoring bias and how does it influence decision making?
What is the difference between price anchoring and anchoring bias?
How does confirmation heuristic relate to anchoring bias?

This video is also useful for

Students - Get insights about cognitive biases like anchoring bias and how it affects reasoning.
Educators - Framework of cognitive biases to help illustrate psychological decision-making processes.
Researchers - An understanding of cognitive biases for the development of relevant psychological studies.
Psychology Enthusiasts - Offers understanding of how biases affect our daily decision-making process.

Tags

Anchoring-and-adjustment Heuristic Bias Judgment Initial Anchor Mental Shortcut Adjustments Final Decision Arbitrary Starting Point Estimation Speeding Ticket Anchoring Information Partial Computation Unpleasant Outcome Salesman's Offer Price Expectation Bias Awareness Decision-making