Anchoring Bias: How the First Number Controls Everything

What Is Anchoring Bias?

Anchoring bias is the tendency to rely too heavily on the first piece of information you encounter when making decisions. That initial reference point, the "anchor," disproportionately influences your subsequent judgments, even when the anchor is arbitrary or irrelevant.

Psychologists Daniel Kahneman and Amos Tversky first demonstrated this effect in the 1970s. In one famous experiment, they spun a rigged wheel of fortune that landed on either 10 or 65, then asked participants to estimate the percentage of African countries in the United Nations. Those who saw 65 guessed significantly higher than those who saw 10, despite the wheel having no connection to the question. The random number had anchored their thinking.

Anchoring works because your brain uses the initial value as a starting point and then adjusts from there. The problem is that the adjustment is almost always insufficient. You move away from the anchor, but not nearly far enough.

Anchoring in the Real World

Salary negotiation. When a job posting lists a salary range of $60,000 to $80,000, the entire negotiation is already framed. Even if your skills justify $95,000, your brain treats $80,000 as the ceiling. Candidates who state their desired salary first tend to end up with higher offers because they set the anchor. Those who let the employer go first often find themselves negotiating downward from a number that was already lower than their value.

Real estate pricing. Listing a house at $450,000 establishes an anchor for every potential buyer. Even if comparable homes have sold for $380,000, buyers will mentally start at $450,000 and negotiate down. Studies show that higher listing prices, even unrealistically high ones, lead to higher final sale prices. The anchor pulls the entire negotiation upward.

Restaurant menus. High-end restaurants often place an extremely expensive item at the top of the menu. A $65 steak makes the $32 pasta seem like a reasonable choice, even though the same pasta might feel expensive on a menu where nothing exceeds $20. The expensive item is not necessarily there to sell; it exists to make everything else look like a better deal.

Retail pricing. The "original price" on a sale tag serves as an anchor. A jacket marked down from $200 to $120 feels like a bargain. The same jacket priced at $120 without a reference to $200 would be evaluated purely on its own merits. Retailers understand that the crossed-out price does as much selling as the actual price.

"In any negotiation, the person who sets the first number does not just start the conversation. They define the boundaries of what feels reasonable."

Why Anchoring Is So Powerful

Anchoring persists even when people are explicitly warned about it. In experiments where participants are told that the anchor is random and irrelevant, it still influences their estimates. This is because anchoring operates largely below conscious awareness, making it one of the most difficult biases to counteract through willpower alone.

The bias is particularly dangerous in situations involving uncertainty. When you do not know the true value of something, whether it is a used car, a freelance project, or a settlement in a lawsuit, you are most vulnerable to anchoring. The less information you have, the more heavily you rely on whatever reference point is available.

Experts are not immune. Studies of real estate agents showed that they were influenced by listing prices just as much as amateurs, even though they had access to comparable sales data and years of experience. The difference was that the agents confidently denied being influenced, while producing estimates that clearly were.

Signs You Might Have This Bias

• You evaluate sale prices based on the "original" price rather than the item's actual value to you
• You feel uncomfortable making the first offer in a negotiation, not realizing the strategic advantage it provides
• You base your budget for a purchase on the first price you see rather than on independent research
• You judge a restaurant's value based on the most expensive item on the menu rather than on the quality of what you ordered
• You adjust your expectations based on initial estimates even when new information suggests those estimates were wrong
• You find it difficult to reconsider a price or value once you have heard a specific number

How to Counter Anchoring Bias

Because anchoring operates automatically, the best defenses are structural. You need systems and habits that reduce the anchor's influence before it takes hold.

Consider multiple anchors. When you encounter a number, deliberately generate alternative reference points. If a consultant quotes $15,000 for a project, think about what other consultants charge, what the project would cost to do in-house, and what the value of the outcome is worth. Multiple reference points dilute the power of any single anchor.

Make the first move strategically. In negotiations, making the first offer is usually advantageous because you set the anchor. Research your position thoroughly, then state your number with confidence. An ambitious but justifiable opening offer pulls the entire negotiation toward your preferred outcome.

Pause before responding to numbers. When someone gives you a price, deadline, or estimate, resist the urge to respond immediately. Take time to evaluate the number against your own research. The urgency to respond quickly is what allows the anchor to take hold unchallenged.

Focus on the other party's interests. Instead of negotiating around a number, shift the conversation to underlying needs and constraints. This reframes the discussion from positional bargaining, where anchors dominate, to interest-based negotiation, where creative solutions can emerge.