Likewise, we usually interpret that if a person is wearing glasses is intelligent, which may or may not be the case. But this might not be the case as there might be a possibility that the person with expensive accessories might have rented those.

On the other hand, if we see somebody with expensive clothes and accessories, we think that he/she is rich. Anchoring bias occurs when an individual offers importance to unnecessary details, which leads to errors in decision making.Ī widespread example of anchoring bias is when we see any individual with shabby clothes we automatically tend to assume that he might be poor or a financially weak individual. And one of the most common systematic biases that influence individuals' predictions is 'anchoring' or choosing forecasts.Īnchoring bias indicates that an individual relies too much on the recent or initial information which has been given to them and makes decisions based on the same information. Here, an irrelevant anchor has influenced their thinking.Īmos Tversky and Daniel Kahneman in 1974 found out that the predictions of different individuals are prone to a systematic bias, which leads them to predictable forecast errors. The highest estimates came from people who had spun high numbers on the wheel. Their guesses confirmed the anchoring effect. Later, he asked people to estimate how many African countries were part of the United Nations. He took a spinning wheel and asked his participants to spin it. What is Anchoring Bias?Ī psychologist Amos Tversky experimented to see the effect of anchoring on individuals' decision making. We start with something that we know and move onto unfamiliar territories. Whenever we try to guess something, we use anchors. We found a reference point, in this case, in 1947, as the year of Indian independence, and walked towards an educated guess. Whatever the correct answer may be, the point of this example is the way we derived our solution. So let's assume that he was around 80 when he died-making 1888 our year of estimate when he was born. And in all the pictures you have ever seen of him from that time, he looked pretty old. How would you find out? Perhaps you know that India got independence in 1947 and that he was assassinated in the next year in 1948. Do you know when Mahatma Gandhi was born? Let us suppose you don't have the year in your head, and your smartphone battery has just died.

The anchoring effect examples