Imagine you are shopping and see a T-shirt for 89 euros. Next to it is a similar one for 39 euros. Your first thought is, "What a bargain!" But is 39 euros really cheap? Maybe the same shirt costs only 20 euros somewhere else. Or you are in a job interview and the recruiter asks, "How about a starting salary of 35,000 euros?" Even though you wanted 45,000, you suddenly settle around 37,000 and feel disappointed. This invisible trap is called the anchoring effect. It can cost you money, satisfaction, and sometimes even good relationships.
I have spent the past few years studying cognitive biases. I have seen the anchoring effect everywhere: in salary negotiations, car purchases, relationships, and even supermarket shopping. Research shows that the first value you hear or see can pull you towards it, even when it is completely irrelevant.
The good news is that falling for this effect does not make you a poor negotiator or naive. Your brain is looking for shortcuts to make complex decisions faster. This happens to all of us. The difference is whether you notice it and can respond.
This article explains what the anchoring effect is and how it can skew your decisions. You will see everyday examples from work, relationships, and shopping. You will also get five practical strategies to handle anchors more deliberately so you are no longer as easy to manipulate.
What is the anchoring effect?
The anchoring effect is a cognitive bias. This means your brain is influenced by the first piece of information it receives. That first number or statement acts like an anchor, pulling your later estimates and decisions in a particular direction. It can be hard to move on mentally, even when the anchor is arbitrary or irrelevant.
Psychologists Amos Tversky and Daniel Kahneman ran a classic experiment in 1974. They asked participants to spin a wheel of fortune that landed randomly on 10 or 65. Then they asked them to estimate what percentage of UN members were African countries. Those who spun 65 gave much higher estimates on average than those who spun 10. Even though everyone knew the wheel had nothing to do with the UN, it strongly affected their answers.
In another example, behavioural economist Dan Ariely asked students to write down the last two digits of their Social Security numbers. They then bid on bottles of wine. The result: those with high final digits bid an average of $27.91. Those with low digits bid only $8.64. It was the same wine. Your brain grabs at any way to reduce uncertainty, even when that approach makes no sense.
Why does it happen?
Your brain is lazy, not in a bad way, but in the sense that it saves energy. It constantly looks for shortcuts to help you make quick decisions. These mental shortcuts are called heuristics. The anchoring effect arises through two mechanisms: the adjustment heuristic and priming.
The adjustment heuristic means that you start from a value and adjust it. But the adjustment is too small. If your manager proposes a salary of 40,000 euros, you might think, "Too little," and ask for 42,000. Without the anchor, you might have asked for 50,000. Your brain moves away from the anchor, but not far enough.
Priming means that the first piece of information activates certain thoughts in your mind. These then influence your later judgements without you noticing. If you see a car priced at 30,000 euros, you automatically keep thinking in that price range. Then 28,000 euros can seem like a bargain, even if the market price is closer to 22,000.
This effect is not rational. It happens automatically. Even when you know an anchor is irrelevant, it can still affect you. Researchers call it robust because it works in many situations and for many people.
Everyday examples
Have you ever been in a furniture shop and seen a sofa for 2,500 euros? Next to it is a "special offer" for 1,800 euros. You think, "Wow, I saved 700 euros!" But you have no idea whether 1,800 euros is a fair price. The high price has done its job: it is your anchor. You are comparing the prices with each other, not with the market.
Or imagine that your partner suggests a holiday budget of 2,000 euros per person. You think it is expensive, but you agree on 1,800 euros. Without that anchor, you might have suggested 1,200 euros. You have now spent more than necessary and still feel bad because you "cut back."
The same thing can happen at work. You are applying for a job, and the recruiter asks, "How about an annual salary of 35,000 euros?" Even if you wanted 45,000, your mind stays close to 35,000. Perhaps you negotiate up to 38,000 and think you have won. But you have left 7,000 euros on the table because the anchor held you back.
One last example from friendships: your friend says at a restaurant, "Let's order something nice, around 40 euros per person." Even if you wanted to spend only 20 euros, you end up at 35. The anchor has shifted your idea of a reasonable price without you really noticing.
With and without awareness of the anchoring effect
Without awareness: You are negotiating your salary. Your future manager says, "We were thinking of 40,000 euros a year." You think for a moment and reply, "Could you do 42,000?" They agree. You feel good for a moment because you negotiated. Two weeks later, you hear from a colleague that they got 48,000. You feel underpaid and regret your decision.
With awareness: You are in the same conversation. Your manager says, "We were thinking of 40,000 euros." You recognise the anchor and consciously set it aside. You say, "I have researched the market. The average salary for someone with my qualifications is 50,000 euros. I am looking for 48,000." You set your own anchor. In the end, you agree on 46,000. You are satisfied because you used your research instead of negotiating reactively.
How to handle it
You cannot switch off the anchoring effect completely, but you can notice it and weaken its influence. Here are five practical strategies:
- Pause and ask yourself, "Which first value is influencing my thinking right now?" Write it down. Then ask, "Is this number really relevant?" Often it is not. Research market prices, average salaries, or objective comparisons. Start your estimate from zero.
- Set your own anchor first. In negotiations, the person who speaks first sets the frame. If you are selling a car, name a high but defensible price first. This shifts the discussion in your direction. When negotiating a salary, name your figure before the employer does.
- Use the three-value method. Instead of making one estimate, think of three possible values: low, medium, and high. This helps you move away from the first anchor. Then choose deliberately which is most realistic. This technique forces your brain to think more flexibly.
- Talk with others before you decide. Friends, colleagues, or family may have different anchors in mind. Their perspective can help you notice your own bias. Ask what they would estimate and compare it with your first idea. Differences can show you where an anchor has affected you.
- Practise deliberately in everyday life. At the supermarket, look at prices without focusing only on the first one. Compare several brands before you decide. For online purchases, use price comparison apps. These small exercises train your brain to think more independently.
Key takeaways
- The anchoring effect makes you unconsciously stick to the first information you receive, even when it is irrelevant.
- Your brain uses heuristics to make quick decisions, but it does not adjust far enough away from the anchor.
- Falling for an anchor does not make you a poor negotiator. It happens to all of us because the process is automatic.
- Notice anchors by asking, "Which first number is influencing me?" Set it aside and research objective values.
- In negotiations, set your own anchor first and use the three-value method to think more flexibly.
- Try this once this week while shopping or in a conversation. Notice an anchor, set it aside, and see what happens.