What is the anchoring effect in psychology?

Learn how the anchoring effect in psychology works, why it can lead to bias, and how to overcome the anchoring effect. Anchoring describes the bias where you depend too heavily on an initial piece of information when making decisions.

What is anchoring effect & opportunity cost?

Anchoring effect: The tendency for a person to rely heavily on the first piece of information they receive when making decisions. Cognitive bias: A systematic error in thinking that affects people's judgment and decisionmaking. Opportunity cost: The value of the next-best alternative when a decision is made; it's what is given up.

What is anchoring in decision making?

During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor.

What is the anchoring effect in negotiation?

Letting your counterpart know your bottom-line, highest price, or lowest acceptable bid, is an example of the anchoring effect in negotiation and demonstrates the powerful effect of information on bargaining strategy.