How anchoring bias affects everyday decisions

Hi everyone welcome back to another blog! Today, I am going to dive into another cognitive bias that most of us deal with daily: Anchoring Bias. It's this strange phenomenon where the first bit of information we see or hear sets the stage for all the decisions we make following this.

Have you ever wondered why prices on sale items show a 'before' price before the discounted one? This isn't just a random design choice all businesses make. It's all about anchoring. When we first see that price, our brains attach to it and suddenly it seems like a steal- even if it's more than what we would've wanted to pay. This may seem simple, but it works because our brains struggle with moving away from that initial 'anchor' that we first saw.

For example, Amazon's infamous 'lightning deals'. If a product's original price is shown as $100 and is listed for $60 in a flash sale, the anchoring effect hits consumers. Even if the $100 price is inflated or not the usual market value, we're going to think that $60 is a steal. This bias tricks us into thinking the discount is too good to pass up, making us purchase items we weren't even shopping for.

However, this bias doesn't stop at just small purchases -it's a big deal in larger markets like real estate as well. Let's say you're hunting for an apartment and your agent shows you a place that is wayy out of your budget at first. Even if you can't afford it, that expensive apartment sets up an anchor, subtly raising your expectations for what a 'normal' price is. Suddenly other places that may have seemed pricy before now look reasonable in comparison.

This is a common strategy used in real estate, where showing a higher-priced home at first can make buyers/consumers more likely to consider properties that are near their maximum budget. It's a psychological setup that works.

Additionally, anchoring bias also plays a big role in negotiations. Have you ever sold something online? Here's a personal example from when I used Dubizzle to sell my old laptop. I put it up at a high price, knowing that people are likely to want to bargain and get the price down. The initial price I placed set up an anchor that made the people who were interested in buying feel like negotiating down a bit meant they were getting a good deal. I ended up selling it for more than I expected, all because the initial number was higher than what I actually wanted!

This principle also works during salary negotiations. Research has shown that if a job candidate opens with a high expectation for a salary, they're more likely to get a higher final offer than if they had started lower. Even if the initial number is ambitious, this figure sets a mental anchor that's tough for the company to ignore.

Anchoring isn't just about money though. Think about estimating how long something will take. If a friend tells you they finished their class project in two hours, that estimate can act as an anchor. If it's taking you longer, you may think that you're being too slow, or it won't be as good if you take less time, which may not be the case at all. However this two-hour estimate has already set the benchmark and it's hard to shake off.

Have you ever heard of those '30-day fitness challenges'? The idea of seeing major results like a six-pack or toned arms in 30 days anchors us to a timeline that may not be realistic for everyone, but we are often tempted to buy the membership regardless. This initial 30-day anchor shapes our expectations of what we can achieve and whether purchasing this membership will yield the results we want, even if a longer, gradual process may be more effective or realistic.

This bias even shows up when making charitable donations. When people see suggested amounts for donations, it becomes more likely that they pick one of the higher suggestions instead of choosing an amount completely on their own. For example, if a charity suggests donation options like $40, $60, and $100, people are more likely to pick $40 or $60 than if those options weren't shown. Get this: if the suggestions are higher, people tend to donate more on average, even if they might have donated less if they were left to choose freely.

But how can we avoid falling for these anchors? The good news is you can avoid falling for anchoring bias if you're aware of it. Start by asking yourself if the first piece of info you're given really matters. When it comes to sales, ignore what the 'original' price is and focus on what you think the item is worth, or how much you need it. When negotiating, try to go in with your own research, so you aren't swayed by an initial number that doesn't align with your plans.

So next time you see a big discount, a high opening offer, or a “too-good-to-be-true” result in 30 days, ask yourself if you’re making a decision based on the anchor—or on what actually makes sense for you.

That’s it for this entry! Hope this helped you see how anchoring can shape our choices in ways we don’t even realize. Let me know if you’ve ever caught yourself falling for an anchor—I’m sure we’ve all been there. See you in the next entry :)!