When I’m mediating a dispute involving money, I notice how frequently parties want the other side to make the first offer. It’s clear that many people consider it a disadvantage to go first. If you know anything about the concept of anchoring, though, you also know that making the first offer can actually put you in a very powerful position.
Psychologists Daniel Kahneman (also the winner of the 2002 Nobel Prize in economics) and Amos Tversky have researched the kinds of mental shortcuts, called heuristics, which people take when making a decision involving uncertainty. They’ve found that we tend to make decisions using some kind of reference point (anchor) and that we adjust our own number higher or lower according to that reference point.
And here’s the rub: Even if the reference point we use isn’t associated with the decision itself, it can influence us heavily. In a 1974 study, Kahneman and Tversky spun a "wheel of fortune" type wheel labeled with numbers 1-100. They then asked participants to guess the number of African countries in the United Nations. The number showing up on the wheel – a random number, mind you – influenced participants’ answers. For example, when the number on the wheel was 10, the median estimated percentage was 25 African countries in the U.N. When the number on the wheel was 65, the estimate was 45.
These results have been duplicated again and again in subsequent studies. Cornell MBA students were asked to name the year that Attila the Hun was defeated (AD 451). But before answering, they were asked to add 400 to the last three digits of their telephone number. When the resulting sum was between 400 and 599, the students’ average guess was that Attila the Hun was defeated in AD 629. When the number was between 1200 and 1399, the average guess was AD 988. Wow!
The influence of anchors has been investigated in research on consumers’ buying decisions (just think about the car dealer’s price sticker on the next car you buy), gambling decisions, opinions on the fair market value of a piece of real estate, and even judges’ perceptions of whether or not someone is lying.
