Real-life Examples of Anchoring Effect 1. It was found that the participant who got the large number on the spinning wheel of fortune guessed the larger number of members in the United Nations than those who got the lower number. After this, the participants were asked to name the total number of member states in the United Nation.
In another experiment conducted by Amon Tversky, the subjects were told to spin the ‘wheel of fortune.’ Then, the participants have to note down the number that comes on the wheel.
#The anchoring effect definition series#
The first group estimated a smaller value (512) as they were presented with the series that initiates from the smaller digits, while the second group estimated a larger value (2,2,50) as they were presented with the series that started from the larger digits. The large difference in the estimation of the first group and the second group is due to the anchor effect. According to the results of the experiment, the first group estimated (median estimate) 512 to be the answer, and the second group estimated (median estimate) 2,250 be the answer, while the right answer is 40,320. As they were provided with a very limited time, the participants did just the first few calculations and then estimated the answer based on the initial calculation, i.e., they made use of an anchor to find the estimated answer. The participants were told to solve the problem in just 5 seconds. The second group had to solve the same series, but it was given in the reverse order, i.e., They divided the children into two groups, the first group had to solve the following calculation, In one of their publications ‘Judgment under Uncertainty: Heuristics and Biases,’ they conducted a study on high school children. The anchoring effect was formulated by Amos Tversky and Daniel Kahneman (Noble prize winner) through the various studies conducted by them in 1974. Although the quality of this shirt is lower than the one you first saw, you are more likely to take your decision based on the price of the first shirt. Now, due to the anchoring effect, you tend to compare the price of this second shirt with the first shirt, and you are more likely to buy this shirt as you think it is at a cheaper price. For example, you have seen a shirt that costs $ 500, you liked the shirt but thinks it is costly, then you see another shirt that costs $100. The anchoring effect comes into play in the decision-making process where we tend to focus too much on the first piece of information (anchor) or the previously stored information in our memory. We tend to compare or estimate all the information that we encounter later with the first piece of information (anchor) that we encounter. The tendency of our brain to focus on the information that we encounter first is known as the Anchoring effect or Anchoring Bias.
You think it’s a great deal and buy that item at half the price of the item that you checked first, i.e., at 500 dollars. You get excited and compare it with the price range of the first item the salesman showed to you. You ask for the item in the lower range, and then the salesman brings you a similar item and says that this item is at a 50% discount today. The salesman shows you more options but that is also in the same range as he showed you first. You think it is more than your budget, and you ask for more options. You went to the nearby store, and the salesman shows you the item, and it costs 1000 dollars. Imagine a scenario, You want to buy an item, but you don’t have much idea that how much does that item will cost you.
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