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Anchoring bias occurs when people rely too heavily on the first piece of information they receive -- the "anchor" -- when making decisions. This bias can lead to errors in judgment and can influence choices in various contexts, including financial decisions, negotiations and problem-solving situations.

This type of ​​cognitive bias is believed to stem from the brain's tendency to use shortcuts, known as heuristics, to make decisions quickly. When presented with an initial piece of information, the brain often latches onto it and adjusts subsequent judgments based on that initial anchor. This can cause people to overvalue or undervalue subsequent information, affecting decision-making.

Impact on decision-making

Anchoring bias can manifest in various ways. For instance, in a negotiation scenario, the initial offer made by one party can serve as an anchor, influencing the final agreed-upon price. Similarly, in a retail setting, the original price of a product can influence how much consumers are willing to pay, even if the discounted price is still higher than the product's actual value.

Anchoring bias can have significant effects on decision-making, often leading to suboptimal outcomes. In financial markets, investors may anchor their expectations for future stock prices based on past performance, leading to irrational investment decisions. In legal proceedings, jurors may be swayed by the initial arguments presented by the prosecution or defense, even if subsequent evidence contradicts those arguments.

Recognizing the presence of anchoring bias is the first step in minimizing its effects. By being aware of the tendency to anchor on initial information, people can make a conscious effort to consider additional data before reaching a decision. Encouraging diverse perspectives and seeking out alternative sources of information can also help counteract the influence of anchoring bias.