People suffer from a hindsight bias, thinking that past outcomes were more predictable at the time than they really were, because they anchor on current knowledge and then adjust (insufficiently) for the fact that certain things that are known now were not known back then. For example, people’s estimates of what other people are thinking are often egocentrically biased (i.e., people assume that others think more similarly to how they themselves think than is actually the case) because they tend to start with their own thoughts and then adjust (insufficiently) for another person’s perspective. The anchoring and adjustment heuristic is of great interest to psychologists because it helps to explain a wide variety of different psychological phenomena.
![example of the anchoring and adjustment heuristic example of the anchoring and adjustment heuristic](https://image.slidesharecdn.com/anchoring-heuristicdecisionmaking-170106040358/95/anchoringheuristic-decision-making-41-638.jpg)
Note that the actual answer is 40,320, which shows even more powerfully that both groups adjusted insufficiently. If initial anchor values did not bias final estimates, the average estimates of the two groups would have been the same. The average estimate of the first group was 512, whereas the average estimate of the second group was 2,250. Because the two groups of respondents started with different anchor values, they came up with predictably different estimates. The second group started from a larger number (“eight times seven is fifty-six…so…”). The first group did so by extrapolating from a relatively low number (“one times two is two, two times three is six…so it’s probably about…”). Because the allotted time was too short to permit an exact calculation, respondents had to estimate. In another telling demonstration, Tversky and Kahneman asked people to tell them within five seconds the product of either 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 or 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1. Thus, the initial anchor value, even when its arbitrary nature was quite apparent, had a pronounced effect on final judgments. Their average subsequent estimate was 45%. Other participants were initially asked whether the percentage of African countries in the United Nations is higher or lower than 65%. Their subsequent average estimate of the actual percentage was 25%. For example, some participants were asked whether the percentage of African countries in the United Nations is higher or lower than 10%. The participants were then asked to estimate the precise value of the quantity in question. They spun a “wheel of fortune” and asked participants if certain quantities were higher or lower than the number on which the wheel landed. That is, the initial value exerts some “drag” on the final estimate, systematically biasing the result.Īmos Tversky and Daniel Kahneman, who brought the anchoring and adjustment heuristic to psychologists’ attention, provided a clear demonstration of the insufficiency of adjustment.
![example of the anchoring and adjustment heuristic example of the anchoring and adjustment heuristic](http://www.opussoftware.co.uk/opusfsi/addon_report_local_m.jpg)
The choice of the term anchor for the starting value speaks to one of the most interesting features of this procedure: People typically fail to adjust sufficiently. You start with an initial anchor value and then adjust until an acceptable answer is found. “My last paper took a week to write, but this one is more demanding so maybe two weeks is a good guess.” “Mortgage rates are low by historic levels, so perhaps they’ll be a couple of points higher in five years.” “The fatality rate in the last war was 1.5%, but our enemies are catching up technologically maybe 4% is a more likely figure in the next conflict.”Įstimates such as these are based on what psychologists call the anchoring and adjustment heuristic. One of the most common is to start with a value that seems to be in the right ballpark and then adjust it until a satisfactory estimate is obtained. How long will it take to complete a term paper? How high will mortgage rates be in five years? What is the probability of a soldier dying in a military intervention overseas? There are many ways to try to answer such questions.
![example of the anchoring and adjustment heuristic example of the anchoring and adjustment heuristic](https://i0.wp.com/pactiss.org/wp-content/uploads/2015/03/Dilbert-ATA.gif)
Life requires people to estimate uncertain quantities. Anchoring and Adjustment Heuristic Definition