Anchoring and Adjustment
Anchoring and Adjustment is a cognitive bias that influences decision-making. It refers to the tendency of people to rely heavily on the first piece of information encountered (the "anchor") when making judgments or decisions, and then adjust from that anchor to reach a final decision. This adjustment might not be enough to fully counter the initial anchor's influence, leading to biased decisions.
Understanding anchoring and adjustment allows individuals to make more rational decisions by consciously adjusting away from initial anchors and considering a broader range of information.
Example: If you're negotiating a salary, rather than accepting the first number offered, you can research industry standards, consider your qualifications and the job market, and propose a counteroffer based on these additional data points.
Imagine you're shopping for a new phone. You see one that's originally priced at $1000, but it's on sale for $800. That $1000 price tag is the anchor. Even though $800 might still be expensive, it seems like a great deal compared to the original price, influencing you to think it's a better deal than it might actually be.
Areas it can help in: Shopping, spending, negotiations, decision-making
