Anchoring

__NOTOC__Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily, or "anchor," on one trait or piece of information when making decisions.

During normal decision making, individuals anchor, or overly rely, on specific information or a specific value and then adjust to that value to account for other elements of the circumstance. Usually once the anchor is set, there is a bias toward that value.

Take, for example, a person looking to buy a used car. They may focus excessively on the odometer reading and model year of the car, and use those criteria as a basis for evaluating the value of the car, rather than considering how well the engine or the transmission is maintained.

The "focusing effect" (or focusing illusion) is a cognitive bias that occurs when people place too much importance on one aspect of an event, causing an error in accurately predicting the utility of a future outcome.

People focus on notable differences, excluding those that are less conspicuous, when making predictions about happiness or convenience.For example, when people were asked how much happier they believe Californians are compared to Midwesterners, Californians and Midwesterners both said Californians must be considerably happier, when, in fact, there was no difference between the actual happiness rating of Californians and Midwesterners. The bias lies in that most people asked focused on and overweighed the sunny weather and ostensible easy-going lifestyle of California and devalued and underated other aspects of life and determinants of happiness, such as low crime rates and safety from natural disasters like earthquakes (both of which large parts of California lack).

Anchoring and adjustment heuristic

Anchoring and adjustment is a psychological heuristic that influences the way people intuitively assess probabilities. According to this heuristic, people start with an implicitly suggested reference point (the "anchor") and make adjustments to it to reach their estimate.

The anchoring and adjustment heuristic was first theorized by Amos Tversky and Daniel Kahneman. In one of their first studies, the two showed that when asked to guess the percentage of African nations which are members of the United Nations, people who were first asked "Was it more or less than 45%?" guessed lower values than those who had been asked if it was more or less than 65%. The pattern has held in other experiments for a wide variety of different subjects of estimation. Others have suggested that anchoring and adjustment affects other kinds of estimates, like perceptions of fair prices and good deals.

Some experts say that these findings suggest that in a negotiation, participants should begin from extreme initial positions.

As a second example, consider an illustration presented by MIT professor Dan Ariely. An audience is first asked to write the last 2 digits of their social security number, and, second, to submit mock bids on items such as wine and chocolate. The half of the audience with higher two-digit numbers would submit bids that were between 60 percent and 120 percent more," far higher than a chance outcome; the simple act of thinking of the first number strongly influences the second, even though there is no logical connection between them. [Edward Teach, [http://www.cfo.com/article.cfm/3014027 "Avoiding Decision Traps] ," CFO (1 June 2004). Retrieved 29 May 2007.]

References

*Del Missier, F., Ferrante, D., & Costantini, E. (2007). Focusing effects in predecisional information acquisition. "Acta Psychologica, 125", 155-174.
*Schkade, D. A., & Kahneman, D. (1998). Does living in California make people happy? A focusing illusion in judgments of life satisfaction. "Psychological Science, 9", 340-346.

ee also

* Affect heuristic
* Framing (social sciences)
* Framing (economics)
* Social judgment theory

References

* [http://www.hss.caltech.edu/~camerer/Ec101/JudgementUncertainty.pdf Tversky, A. & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. "Science", 185, 1124-1130.]

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