Anchoring and Adjustment Heuristic Definition
Life requires people to estimate uncertain quantities. How long will it take to complete a term paper? How high will mortgage rates be in five years? What is the probability of a soldier dying in a military intervention overseas? There are many ways to try to answer such questions. One of the most common is to start with a value that seems to be in the right ballpark and then adjust it until a satisfactory estimate is obtained. “My last paper took a week to write, but this one is more demanding so maybe two weeks is a good guess.” “Mortgage rates are low by historic levels, so perhaps they’ll be a couple of points higher in five years.” “The fatality rate in the last war was 1.5%, but our enemies are catching up technologically; maybe 4% is a more likely figure in the next conflict.”
Estimates such as these are based on what psychologists call the anchoring and adjustment heuristic. You start with an initial anchor value and then adjust until an acceptable answer is found. The choice of the term anchor for the starting value speaks to one of the most interesting features of this procedure: People typically fail to adjust sufficiently. That is, the initial value exerts some “drag” on the final estimate, systematically biasing the result.
Amos Tversky and Daniel Kahneman, who brought the anchoring and adjustment heuristic to psychologists’ attention, provided a clear demonstration of the insufficiency of adjustment. They spun a “wheel of fortune” and asked participants if certain quantities were higher or lower than the number on which the wheel landed. The participants were then asked to estimate the precise value of the quantity in question. For example, some participants were asked whether the percentage of African countries in the United Nations is higher or lower than 10%. Their subsequent average estimate of the actual percentage was 25%. Other participants were initially asked whether the percentage of African countries in the United Nations is higher or lower than 65%. Their average subsequent estimate was 45%. Thus, the initial anchor value, even when its arbitrary nature was quite apparent, had a pronounced effect on final judgments.
In another telling demonstration, Tversky and Kahneman asked people to tell them within five seconds the product of either 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 or 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1. Because the allotted time was too short to permit an exact calculation, respondents had to estimate. The first group did so by extrapolating from a relatively low number (“one times two is two, two times three is six…so it’s probably about…”). The second group started from a larger number (“eight times seven is fifty-six…so…”). Because the two groups of respondents started with different anchor values, they came up with predictably different estimates. The average estimate of the first group was 512, whereas the average estimate of the second group was 2,250. If initial anchor values did not bias final estimates, the average estimates of the two groups would have been the same. Clearly, they were not. Note that the actual answer is 40,320, which shows even more powerfully that both groups adjusted insufficiently.
The anchoring and adjustment heuristic is of great interest to psychologists because it helps to explain a wide variety of different psychological phenomena. For example, people’s estimates of what other people are thinking are often egocentrically biased (i.e., people assume that others think more similarly to how they themselves think than is actually the case) because they tend to start with their own thoughts and then adjust (insufficiently) for another person’s perspective. People suffer from a hindsight bias, thinking that past outcomes were more predictable at the time than they really were, because they anchor on current knowledge and then adjust (insufficiently) for the fact that certain things that are known now were not known back then. Also, people tend to assume that they will do better than others on easy tasks because they start with an assumption that they will do well themselves and then adjust (insufficiently) for the fact that other people are also likely to do well on such easy tasks.
Beyond its importance to psychologists, the anchoring and adjustment heuristic has important implications for all of us in our daily lives. We must all be alert to the influence that arbitrary starting values can have on our estimates, and we must guard against individuals who might try to sway our judgments by introducing starting values that serve their interests, not ours. It has been shown, for example, that an opening proposal in a negotiation often exerts undue influence on the final settlement, and so we may want to pay considerable attention to how the opening proposals are made and who makes them. It has also been shown that the items we buy in the grocery store are powerfully affected by the anchor values that are put in our heads by advertisers. In one study, for example, an end-of-the-aisle promotional sign stated either “Snickers Bars: Buy 18 for your Freezer” or “Snickers Bars: Buy them for your Freezer.” Customers bought 38% more when the advertisers put the number 18 in customers’ heads. Buyer beware.
- Epley, N., & Gilovich, T. (2001). Putting adjustment back in the anchoring and adjustment heuristic: Self-generated versus experimenter provided anchors. Psychological .Science, 12, 391-396.
- Gilovich, T., Griffin, D. W., & Kahneman, D. (2002). Heuristics and biases: The psychology of intuitive judgment. New York: Cambridge University Press.
- Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185, 1124-1131.
- Wansink, B., Kent, R. J., & Hoch, S. J. (1998). An anchoring and adjustment model of purchase quantity decisions. Journal of Marketing Research, 35, 71-81.