Overview & Description:

Anchoring Bias refers to the human tendency to rely too heavily on the first piece of information encountered (the “anchor”) when making decisions.

Key Points:

1. Decision Making: Once an anchor is set, subsequent judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor.
2. Negotiations: It plays a significant role in negotiations, where the first number proposed can set an arbitrary baseline.
3. Everyday Decisions: Can impact decisions in various domains, from shopping to real estate.

Implications:

1. Economic Decisions: Understanding this bias can help in making more rational economic choices.
2. Awareness: Being aware of the anchor can lead to more balanced decision-making.

References:

• Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124-1131.