Anchoring and Adjustment

heuristics

choices

This is a judgment bias where an initial value (the “anchor”) influences subsequent estimates or decisions. While we might adjust from the anchor, the adjustment is usually insufficient; the final estimate remains too close to the starting point.

Example

Property pricing

An apartment is listed for sale at €425.000. A buyer feels that bringing its price down to €405.000 (i.e. an adjustment) as a win, because it feels reasonable compared to the initial price. Does this reflect though the true value of the property, or is it still anchored to an inflated asking price?.

“If I manage to drop the price by 5% it’s a win… or is it?”

Also relates to: Reference Dependence · Conservatism · Context Dependence · Frame Dependence · Loss Aversion