What is anchoring bias and how does it affect decisions?

Anchoring bias is a cognitive bias that occurs when people rely too heavily on the first piece of information they receive when making decisions. This initial piece of information, or 'anchor,' can then influence how people interpret and evaluate subsequent information. Anchoring bias can affect decision-making in a wide range of contexts, from negotiating prices to making investment decisions.

What is the definition of anchoring bias?

Anchoring bias is a cognitive bias that occurs when people rely too heavily on the first piece of information (or 'anchor') encountered when making decisions. This initial anchor serves as a reference point for all subsequent judgments, and as a result, can heavily influence the final decision, even when the anchor is arbitrary or irrelevant to the decision at hand.

What are some examples of anchoring bias?

Examples of anchoring bias include real estate pricing, salary and contract negotiations, and restaurant menu pricing. In all of these examples, the anchoring bias causes people to rely too heavily on an initial reference point, leading them to overlook other relevant information or make decisions that are influenced by irrelevant factors.

How does anchoring bias affect decision-making?

Anchoring bias can significantly affect decision-making in various contexts, such as salary negotiations, performance evaluations, and marketing techniques. It can influence perception of what is a fair salary, lead to overlooking relevant information, and cause people to be influenced by irrelevant factors. Understanding anchoring bias can help individuals make better decisions and avoid being overly influenced by arbitrary anchors.

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