Anchoring, a bias to watch out for
Anchoring is a cognitive bias that defines the human tendency to rely on the first piece of information about a choice that is provided to them and judge other choices relatively when making a decision. In simple terms, the first thing you see changes your thoughts about other choices although they might be different if you were thinking objectively and rationally.
This is a phenomenon that affects all parts of life. It’s sometimes described as having “standards” or a “first impression.” However for this post, I want to focus on the business / economic side of it. Anchoring is quite prevalent in marketing and being aware it is important to ensure a rational decision.
The bias was best demonstrated by Professor Dan Ariely in an experiment conducted on 100 MIT students.
Students were asked to choose the best subscription plan for a magazine. They were given the following choices.
|Subscription||Best plan (%)|
|Online subscription ($59)||16|
|Print edition subscription ($125)||0|
|Print edition + online subscription ($125)||84|
Makes sense… Which idiot would take the middle option? You get an internet subscription for free at the same price with the other plan! It’s a steal!
Now for the next part of the experiment, on another sample of students, the print only option was removed and presented to students. These were the results.
|Subscription||Best plan (%)|
|Online subscription ($59)||68|
|Print edition + online subscription ($125)||32|
Now what happened here? Isn’t the decision the same? Looks like the students in this case thought that the online subscription was a much better choice than the print subscription. However, the exact same options were present in the previous experiment but the opposite result was realized.
The students used the print edition as the anchor. Now, compared to the print edition, the print + online edition looks so much more appealing. Anchoring prevented them from actually thinking about what they wanted or needed and resulted in them making a irrational choice.
A more common example of this in the real world is with discounts, where shops try to attract customers with a 66% OFF SALE! The businesses always make it a point to show the original price of the item on the price tags. You might not want that $60 jacket, but you might want that $120 jacket which you can get for $60 with a discount.
Anchoring can also have an effect on the political choices people make. You might think Hillary Clinton is a horrible candidate, but with the presence of Donald Trump she might appear more honorable and virtuous than she actually is. I think Clinton tried to rely on this effect a bit too much, hoping Trump’s insane comments make people think she was a better candidate. The magnitude of the effect wasn’t strong enough to get her elected, but I definitely think it’s something to be aware off. The existence of the alt-right does not make the Republican party better. They are still the assholes they always are.
Time to heave up that anchor.