You're at a restaurant with a friend to grab lunch. You check out the menu to see that the first item on the list costs $60! That's expensive! You look down the list and see other options that are around $35. That's a better choice for your budget, right?
Hang on! $35 is still a lot for a meal! Is this really a "cheaper" meal? What influences how you see this price? This is a bias known as the anchoring effect! Like a real anchor, it can drag you down if you don't take the time to understand it.
Understanding the anchoring effect can help you make more informed decisions.
What is the anchoring effect?
The anchoring effect happens when you rely too heavily on one piece of information (the "anchor") in making decisions. This can be a problem because you would be comparing everything to one piece of information, which can lead to poor decisions if you don't consider other information.
Let's say you're shown an image of the Eiffel Tower below. How tall do you think it is?
Photo by Jad Limcaco on UnsplashLooking at the image, you may guess at least 2,000 feet (610meters). However, the tower is actually 1,083 feet (330 meters)! Could you have overestimated it based on the image?
You may have seen the buildings and vehicles below it as an anchor for your guess. Comparing the smaller items to the huge Eiffel Tower could have influenced you to guess a high number. You relied on the image too heavily, proving that the anchoring effect affected your answer!
How does the anchoring effect affect decision-making?
The anchoring effect relies on one piece of information to make a decision. According to the Interaction Design Foundation, this can be based on the value offered or wording. When it comes to the value offered, you'd be comparing big values with small values —like you did with the smaller cars with the huge Eiffel Tower.
As for wording, it can influence how you perceive a situation, which would affect your response. Let's say you witness a car accident, and an officer asks you how fast you think the other car was driving when the collision happened. Consider the wording between the two questions:
"How fast was the car traveling when it hit the other car?"
"How fast was the car traveling when it smashed into the other car?"
The word "hit" can make you guess a small or average number (ex., 40 mph/64 kph). However, "smashed" could make you guess a higher number because that word suggests a more powerful impact (ex., 75 mph/121 kph). This shows how the number you decide can be based on which word you anchor onto.
How can you avoid the pitfalls of the anchoring effect?
How can you make smarter decisions now that you know about the anchoring effect?
Be aware that an anchor exists. Understand that having one source will limit your understanding of your choices.
Question the anchor. Don't just accept the information — evaluate it! Check for relevance and validity to make sure it's a reliable source of information.
Rely on multiple sources. Look for different points of view that can provide a new perspective or challenge the "anchor".
Learn about your choices. The more you understand something, the more informed you are to make a decision that's best for you.
Quiz!
Granny Tera is buying a new couch, and she sees two websites that sell the same couch:
Website 1 is selling the couch for $700 with the description saying it is a lovely red couch.
Website 2 says the couch is now $700 after being 50% off (original price being $1,400), with the description saying you'll "save $700 on this one-of-a-kind, luxurious red couch."
Website 2 also compares a similar couch in its store that is $2,000 without a sale, next to the red couch. Granny Tera is tempted to buy the couch from Website 2.
How does the anchoring effect influence her decisions? Select all that apply:
A. There is some false or misleading information.
B. The original price of $1,400 makes $700 look like a steal.
C. Words like "sale," "one-of-a-kind," and "luxurious" lure her in.
D. It makes a comparison to an unfavorable option.
Quiz
Select any explanations that apply:
Take Action
The $60 item you see on the menu is just an anchor to make the $35 item look like a great deal when it is still ridiculously overpriced for a serving of French fries.
Marketing takes advantage of the anchoring effect, but you know how to make wise decisions because you don't rely on one source of information alone. With an open and critical mind, you know how to better inform yourself to make the decision that's best for you!
To challenge the anchoring effect:
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