Mind Trap #3 | The Anchoring Effect

 

"When we become anchored to a specific figure or plan of action, we end up filtering all new information through the lens we initially drew up in our head, distorting our perception"

 This blog is part of our series of some advanced Mind Traps which will help you overcome difficult situations and equip you with more wisdom for daily living. These include:

1. Cognitive Dissonance
2. Spotlight Effect
3. Anchoring Effect
4. Halo Effect
5. Gambler's Fallacy
6. Contrast Effect
7. Confirmation Bias
8. Baader-Meinhoff Phenomenon
9. Zeigarnik Effect

 

The Anchoring Effect

We rely on our brain to give us best answers. But most of the time we are marginally-informed about the topic or none at all. But our brain doesn't like to commit that it's insufficient. This is usually where most of the cognitive biases arise. The Anchoring effect causes us to rely on the first piece of information we know or are given about a topic.

An untrained mind never sees anything objectively. The easiest trick our mind have to calculate the value of something is to compare it with something we know.

• Experiment
  • Group1
    • Asked - is the height of tallest redwood tree more or less than 1200 feet?
    • Group estimate average around- 844 feet
  • Group2
    • Asked - is the height of tallest redwood tree more or less than 180 feet?
    • Group estimate average around- 282 feet
• Your mind quickly accepts an anchor and estimates the unknown.

To most people, $499 price will definitely seem very expensive for a phone. But when first mentioned that the original price is $999 and we a re reducing it to $499 quickly shifts our thinking. Even though the price is still the same as in the first instance, we now have an ANCHOR. $999 makes the $499 seem less and affordable.

• Anchors can be random values and information
  
• German experiment
  • Culprit- description of a woman who is shoplifter
  • judges with 15+ years experience
  • Judges asked to read this description and roll a dice
    • Dice is loaded to only add up to 9 or 3
  • After this they were asked how much sentence they will give this woman
  • Group1 - dice total 9
    • Group average- 8 months sentence
  • Group2 - dice total 3
    • Group average- 5 months sentence
• Example
  • A child wants to buy a 50,000 Rs. phone
  • He tells his father but doesn't show him other options he like which are similarly priced..
  • Instead he shows him other choices he likes but around 90,000 or more first
  • This way his father is anchoring around 90k. So, now the 50k phone looks like a good deal
   

How to tackle this?

• You can't turn this off
• But you can remind yourself that it exists
• Set an anchor ⚓️ yourself
  • So someone else can't take advantage by setting it for you
• You get a contract sent to you
  • They have sent us the asking price for this deal
  • Let's not let this number influence our thinking
  • Set it aside
  • Lets perform our own due diligence and arrive at our own number
• When you have to make a contract
  • Our objective in this negotiation is to move first and get them anchored to this number
   

 

• Check your mood
• a number of other factors can influence anchoring bias, the major one is bad mood.
• people is bad mood are more effected by anchoring compared to people in good mood
   

 

Stay Tuned! 

Next MindTrap The Halo Effect.