Anchoring Effect

Imagine you’re out shopping for a present for a friend. You find a pair of earrings that you know they’d love, but they cost $100, way more than you budgeted for. After putting the expensive earrings back, you find a necklace for $75—still more than your budget, but hey, it’s cheaper than the earrings!

Why it happens

Anchoring bias is one of the most robust effects in psychology. Many studies have confirmed its effects, and shown that we can often become anchored by values that aren’t even relevant to the task at hand. In one study, for example, people were asked for the last two digits of their social security number. Next, they were shown a number of different products, including things like computer equipment, bottles of wine, and boxes of chocolate. For each item, participants indicated whether they would be willing to pay the amount of money formed by their two digits. For example, if somebody’s number ended in 34, they would say whether or not they would pay $34 for each item. After that, the researchers asked what the maximum amount was that the participants would be willing to pay.

Even though somebody’s social security number is nothing more than a random series of digits, those numbers had an effect on their decision making. People whose digits amounted to a higher number were willing to pay significantly more for the same products, compared to those with lower numbers. Anchoring bias also hold up when anchors are obtained by rolling some dice or spinning a wheel, and when researchers remind people that the anchor is irrelevant.

Examples

$20 $8 for Twitter Blue

Elon Musk palyed the anchoring effect in full swing.

1. Announced Twitter Blue for $20 — set the anchoring
2. Everyone started to complain — expose the information
3. Introduced the real price of $8 — play the effect
4. Everyone chilled and agreed that it is a fair price to pay — win on your own terms