The anchoring effect is a cognitive process that can influence your judgment and decisions. Understanding its sway can help improve your decision-making and mental health.

In today’s information-saturated world, our brains often use shortcuts to process and make decisions. One such shortcut is the anchoring effect, also known as anchor bias.

The anchoring effect is a natural cognitive process, but it can skew the way you interpret information and make decisions. This can significantly impact your overall well-being, especially mentally.

With a little practice, you can take some practical steps to mitigate the influence of anchor bias and make more informed decisions.

The anchoring effect, also known as anchor bias, is a psychological phenomenon in which people rely too heavily on the first piece of information they hear.

In other words, if you hear a certain fact or number (the “anchor”), it can strongly influence your subsequent judgments or decisions, explains Haley Hicks, a licensed clinical social worker in Dallas, TX.

“For instance, if you first see a shirt priced at $100, and then see a similar one for $40, you might consider the second shirt to be a bargain, influenced by the initial ‘anchor’ price of $100,” says Hicks.

Jeff Lundgren, a psychotherapist in Millcreek Utah, adds that with anchoring bias, “the initial data point influences subsequent judgments and decisions even if the anchor is irrelevant or misleading.”

A 2022 study of the anchoring effect of consumers’ price judgment found several factors had a significant impact on the anchoring effect. These included:

  • Gender: female consumers were more strongly influenced by anchoring effect than male consumers
  • Big Five personality: includes open, conscientious, extrovert, agreeable, and neurotic personalities
  • Expert knowledge and skill: familiarity of consumers with a product
  • Cognitive need: willingness to proactively think when judging unknown matters
  • Self-confidence level: the degree to which a person is convinced of their own judgment

Anchoring effect examples

Hicks and Lundgren share some other real-world examples of the anchoring effect:

Real estate

If the seller provides an artificially high listing price and then lowers it, you may think you’re getting a good deal on the property even if it’s still overpriced.

The initial anchor price is what influences your decision-making, not necessarily the current market value of the house.

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Making negotiations

In business and personal negotiations, the party who makes the first offer often sets the tone for the discussion. This initial number is an anchor that can sway the final agreement, even if the first offer is far from reasonable.

For example, in a job negotiation, if the employer gives you an initial offer that is too low, you may have a tendency to accept it or come up with a counteroffer that is only slightly higher than the initial one.

So, even if you were prepared to ask for a certain amount, the initial offer may set your expectations too low and influence you to accept a lower salary.

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According to Lundgren, the anchoring effect isn’t just an abstract psychological concept; it has tangible impacts on an individual’s overall well-being. It can especially impact a person’s mental health, says Hicks.

Mental strain

Lundgren explains that unrealistic expectations set by anchors can lead to dissatisfaction and stress. If someone anchors their self-worth on the unrealistic standards set by social media influencers, for example, it can lead to feelings of inadequacy.

Feeling stuck or trapped

The anchoring effect can also cause you to feel stuck or trapped in your current situation, says Hicks.

“If you’re unable to move away from the initial anchor point, it can become difficult to make any positive changes or take risks. By repeating this pattern over and over again, you may find yourself in an endless downward spiral of poor decisions.”

So, for example, if a person keeps settling for lower wages due to anchoring, they may find themselves in a cycle of struggling to make ends meet and being unhappy with their job.

Financial consequences

Relying on anchors can lead to regrettable financial decisions, like overpaying for a house because the initial listing price (the anchor) skewed perception of its value.

“This can have long-term financial repercussions,” Lundgren notes.

If you constantly fall victim to this cognitive bias, you may often feel dissatisfaction or regret over your choices, leading to stress and self-doubt,” adds Hicks.

“For example, consistently accepting underpaid job offers due to anchoring can lead to financial stress and feelings of being undervalued,” she notes. “Eventually, these feelings can pile up and lead to more serious mental health issues, such as depression or anxiety.”

Creating awareness of anchor bias and how it operates is the first step in counteracting its effect. Then you can consciously take steps to consider additional information.

Here are some more practical tips from our experts:

  • Seek multiple perspectives: Before deciding, gather information from diverse sources to get a well-rounded view.
  • Challenge initial assumptions: Question the validity of the first piece of information you receive. Do you know if it’s truly representative, or is it skewing your judgment?
  • Be mindful when making decisions: Take your time and don’t rush into hastily making a choice based on the first impression you receive. Take a few moments to analyze the various factors at play, consider different outcomes, and weigh all available options. This will help you make more reasoned and balanced decisions.
  • Stay educated on biases: You can actively work to minimize their effects by understanding and recognizing biases in decision-making. Examples include confirmation bias, hindsight bias, and the sunk cost fallacy.

“For instance,” says Hicks, “when negotiating a salary, do some research beforehand to have a clear idea of the industry standard and decide on a fair price range, rather than being overly influenced by the initial offer.”

While the anchoring effect is a natural cognitive process, it can skew the way you interpret information and lead to poor decision-making.

You can mitigate the influence of anchor bias by being aware of its presence, being mindful when making decisions, and considering different outcomes and perspectives.

This can help you make more informed and beneficial decisions, which is good for your mental and overall well-being.