Browse Definitions:
Definition

anchoring effect

Contributor(s): Trea Laverly

Anchoring effect is a form of cognitive bias that causes people to focus on the first available piece of information (the "anchor") given to them when making decisions. It particularly affects decisions regarding numerical values like pricing, both value-based and cost-plus, since customers tend to decide on amounts skewed toward the anchor value. Similar to framing effect, how the anchor value is presented can influence a customer's buying decision.

Anchoring effect is often taken advantage of in sales situations to set prices for products. Setting a price too high might normally deter a potential customer from making a purchase. However, when the vendor then advertises the lower sale price (which may be the price they had actually intended to sell the product for), the original higher price serves as an anchor, making the new sale price seem like a much better deal. The customer will then be much more willing to make the purchase than they would have been if the product had been marked with the lower sale price originally. This can hinder the customer's ability to find a fair and reasonable price.

An example of this is an advertisement run by the magazine The Economist, which offered three subscription options: a web-only subscription, which cost $59; a print-only subscription, which cost $125; or both web and print, which also cost $125. Given these options in a study, no subjects chose the print-only subscription, which was the clearly inferior option, and a majority chose the dual print and web subscription. However,  when they removed the print-only option, the majority of people chose the web-only subscription. Even though nobody was interested in the print-only option, it served as an anchor to make the more expensive, dual subscription seem like a much better deal.

Anchoring can also affect negotiations for prices or salaries. The first suggested price will set a precedent for all subsequent suggestions, including the final price. Therefore, the seller will usually set a high price first. For salaries, an employer might anchor with a low salary offer to a prospective employee in hopes that the employee will counter with a higher salary request that makes both parties comfortable. Anchoring effect has widespread influence, including on professionals who are well-educated on the related topic (like real estate agents evaluating the value of houses) and people who are aware of the potential effect of anchoring and know to adjust for it.

This was last updated in March 2017

Continue Reading About anchoring effect

Join the conversation

1 comment

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

How have you been affected by anchoring bias in your business decisions?
Cancel

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • internal audit (IA)

    An internal audit (IA) is an organizational initiative to monitor and analyze its own business operations in order to determine ...

  • pure risk (absolute risk)

    Pure risk, also called absolute risk, is a category of threat that is beyond human control and has only one possible outcome if ...

  • risk assessment

    Risk assessment is the identification of hazards that could negatively impact an organization's ability to conduct business.

SearchSecurity

  • computer exploit

    A computer exploit, or exploit, is an attack on a computer system, especially one that takes advantage of a particular ...

  • cyberwarfare

    Cyberwarfare is computer- or network-based conflict involving politically motivated attacks by a nation-state on another ...

  • insider threat

    Insider threat is a generic term for a threat to an organization's security or data that comes from within.

SearchHealthIT

SearchDisasterRecovery

  • business continuity and disaster recovery (BCDR)

    Business continuity and disaster recovery (BCDR) are closely related practices that describe an organization's preparation for ...

  • business continuity plan (BCP)

    A business continuity plan (BCP) is a document that consists of the critical information an organization needs to continue ...

  • call tree

    A call tree -- sometimes referred to as a phone tree -- is a telecommunications chain for notifying specific individuals of an ...

SearchStorage

  • OpenStack Block Storage (Cinder)

    OpenStack Block Storage (Cinder) is open source software designed to create and manage a service that provides persistent data ...

  • SATA Express (SATAe)

    SATA Express (SATAe or Serial ATA Express) is a bus interface to connect storage devices to a computer motherboard, supporting ...

  • DIMM (dual in-line memory module)

    A DIMM (dual in-line memory module) is the standard memory card used in servers and PCs.

SearchSolidStateStorage

  • 3D XPoint

    3D XPoint is memory storage technology jointly developed by Intel and Micron Technology Inc.

  • RRAM or ReRAM (resistive RAM)

    RRAM or ReRAM (resistive random access memory) is a form of nonvolatile storage that operates by changing the resistance of a ...

  • JEDEC

    JEDEC is a global industry group that develops open standards for microelectronics.

SearchCloudStorage

  • Google Cloud Storage

    Google Cloud Storage is an enterprise public cloud storage platform that can house large unstructured data sets.

  • RESTful API

    A RESTful application program interface breaks down a transaction to create a series of small modules, each of which addresses an...

  • cloud storage infrastructure

    Cloud storage infrastructure is the hardware and software framework that supports the computing requirements of a private or ...

Close