So at one point, people thought paying $2.50 per gallon was ridiculous, but just years later, they thought this price was a steal. Then, when prices decreased again toward $2.50 per gallon, consumers felt like they were getting a deal whenever they had to fill up. However, prices eventually settled right over that $3 threshold, at which time consumers were able to reset their anchors to this higher standard. So as gas prices started to near the $3 per gallon mark, consumers felt they were paying too much to drive around town. But people had gotten so used to paying under $2 per gallon, that these rates had been anchored in people’s minds. However, slowly but surely, prices crept up. This is considered to be rational behavior, as it shows how people learn from previous experiences to determine a subjective concept of how much everyday items should cost.Īround 2006/2007, the price of gas trended right around $1.85 per gallon. So, when you’re evaluating the cost of gas, if you see it at $50 per gallon, you’re likely to pause before taking out your credit card. When it comes to making purchases, research suggests that people form their opinions of a product’s value and price by considering similar goods that have been purchased in the past. 6 Anchoring Bias Examples That Impact Your Decisions 1. Let’s take a look at some everyday anchoring bias examples that may impact your decisions. While neither answer was especially close to the age at which Gandhi actually died (87), the initial anchor had a clear impact on people’s decided answer. Most people recognize Gandhi’s name and clearly know he didn’t die before the age of nine, and the longest-surviving human died at 122, so what type of impact did these obviously ridiculous questions have on the students’ answers?Īfter being offered an anchor of nine years old, the first group’s average answer for when Gandhi died was 50, and with the higher anchor of 140, the second group guessed an average of 67 years old. For example, in one study, students were split into two groups, with one group being asked if Gandhi died before or after age nine, and the other, if he died before or after he was 140. In fact, there are many studies that show just how powerful this bias is and its impact on all decision making processes. It is very hard for people to avoid falling into this trap when making decisions. This can be problematic because it can not only alter people’s perception, it can also prevent people from changing their minds in any significant way, even if it’s necessary to do so. People use the initial reference point as a filter for any new information that’s obtained and assume a range of plausible values based on this focal point.

Once an anchor is set–or you have some information on a topic–your judgments that follow are made by using that information as a starting point and adjusting your decision based on your interpretation of other factors. That said, anchoring bias refers to the influence that your pre-existing knowledge on a matter has on your future decisions. The researchers found that people make insufficient adjustments from an initially presented value (an anchor) when coming to conclusions. In 1974, Tversky and Kahneman (two of the most influential people in behavioral economics) conducted a classic study that looked at people’s judgment-making process when they’re uncertain about the issue at hand. Read More About Logical Fallacy Examples.6 Anchoring Bias Examples That Impact Your Decisions.

1. the anchoring trap