The Anchoring Effect, a Pervasive Bias in our Everyday Life

Hello Steemians! Today I will like to touch on a topic related to human psychology. However, before I go any further, I have a short survey for you. Answer the following questions in your mind and please do not cheat and jump to the next section without taking the survey. 😉

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1. A store you pass by everyday is always selling their jeans at $60 per pair. Today, you walk by again and see that the same pair of jeans is now selling at $45! Would you buy it because of that?
2. Your son have been getting 80 marks for all his mathematics tests and examinations so far. But today, he came back scoring only 65 marks. Would you scold him for that?
3. A burger is selling for $3 and a cup of coca-cola is selling for $2. Standing in front of the counter, your original plan was to buy a burger. However, you noticed that the combo meal consisting of the burger and a cup of coca-cola costs $4. Would you buy the combo meal instead?

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A Cognitive Bias

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How many "Yes" did you have? If you answered "Yes" to all 3 questions, then you are easily influenced by the cognitive bias known as "anchoring effect". The definition from Harvard is as such,

Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor

As you have seen from the survey questions. Anchoring effect has great impact on our daily life and it is almost impossible to prevent. Humans are susceptible to such bias because we often have to make decisions quickly. The easiest way will then be basing our decisions on information that we first know of without doing much research.

A very real example which almost happened to me was the time when I bought the Netgear mesh WiFi system. The price I saw from a local brick and mortar store was SGD 469. When I checked on Lazada (an online shopping site), the price was $420. If I was too caught up by the "anchor" price of $469, I would have thought the price of $420 is a steal and went for it immediately. However, I did further research and found that a cheaper price at $369. In this case, I managed to outdo the "anchoring effect" a little and get a much fairer price.

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The "anchoring effect" is a powerful cognitive bias that influences our everyday decision. It may sound like it is a bad thing, but if you understand how it works, you will be able to use it to your advantage. For example, if you are shop owner, you can use it to entice shoppers to buy your goods.

The reason why I talked about this topic is because I will be writing a couple of articles related to this topic. One of which is related to Singapore's properties market and my views on it. So stay tuned and thanks for reading! Share your answers to the survey with me and let me know the one time which you fell for this cognitive bias.

Projects/Services I am working on:

• Steem-Oracle Project
• Byteball to Steem conversion service

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