Anchoring and adjustment bias

Anchoring and adjustment bias occurs when individuals rely heavily on the initial information they receive when looking at a problem or situation, and then adjust it slightly to reach a conclusion or decision. This bias often results in decisions that are not based on facts or evidence, but instead on the initial information that was presented. In management, this bias can lead to decisions that overlook factors or details, as the initial information is given too much weight. This can lead to suboptimal decisions and outcomes.

Example of anchoring and adjustment bias

• A manager who is presented with a financial report that shows a company is losing money may anchor on this information, and adjust the decision to cut costs, even though other options may be more cost-effective.
• A hiring manager may anchor on the fact that a candidate has a degree from a prestigious university, and adjust the decision to hire the individual, even though other candidates may have more relevant experience.
• A store owner may anchor on the fact that a product is popular, and adjust the decision to order more of the product, even though demand may be waning.

Types of anchoring and adjustment bias

Anchoring and adjustment bias is a cognitive bias that occurs when people rely heavily on the initial information they receive when making decisions and then adjust it slightly to reach a conclusion or decision. The following are some of the main types of anchoring and adjustment bias:

• Overvaluing: This occurs when people overvalue the initial information they receive and give it too much weight when making decisions.
• Undervaluing: This occurs when people undervalue the initial information they receive and give it too little weight when making decisions.
• Referential Bias: This occurs when people rely heavily on information that is related to the initial information they received, and ignore other relevant information.
• Availability Bias: This occurs when people rely heavily on information that is easily available and ignore other relevant information.
• Confirmation Bias: This occurs when people look for evidence to confirm the initial information they received and ignore evidence that contradicts it.

Limitations of anchoring and adjustment bias

Anchoring and adjustment bias can be a problem in decision-making, as it can lead to suboptimal outcomes, as decisions are not based on all available facts and evidence. Some of the limitations of anchoring and adjustment bias include:

• Failing to think critically: By relying too heavily on the initial information, individuals may fail to think critically about the decisions they make and the outcomes they create.
• Overlooking important factors: When using anchoring and adjustment bias, individuals may overlook important factors or details, as they are too focused on the initial information they receive.
• Making decisions without evidence: This bias can lead to decisions that are not based on facts or evidence. Instead, decisions are based on the initial information presented.
• Making decisions without considering alternatives: Individuals may not consider alternative solutions or decisions, as they are fixated on the initial information they receive.
• Unwillingness to adjust: Individuals may be unwilling to adjust their initial beliefs or opinions, leading to decisions that are not based on facts or evidence.

Other approaches related to anchoring and adjustment bias

Anchoring and adjustment bias can be addressed through a range of approaches. These include:

• Gathering and considering more information: It is important to gather a range of information and perspectives when making decisions, to ensure that all relevant factors are taken into account.
• Challenging assumptions: It is important to challenge assumptions and preconceived notions to ensure that decisions are based on accurate and up-to-date information.
• Encouraging active dialogue: Active dialogue and collaboration with those involved in a decision-making process can help to identify the underlying issues and ensure that all relevant perspectives are taken into account.
• Engaging in ongoing feedback: Regular feedback can help to identify where decisions may be based on bias or incorrect assumptions, allowing for course correction.

In summary, anchoring and adjustment bias can be addressed through a range of approaches, including gathering more information, challenging assumptions, encouraging active dialogue, and engaging in ongoing feedback. By implementing these practices, decision-makers can ensure that decisions are based on facts and accurate information.

Anchoring and adjustment bias — recommended articles

Decision making process — Learning from experience — Behavioral aspects of decision-making — Groupthink — Subjective probability — Degree of freedom — Analysis paralysis — Bias for action — Ethical decision making

References

• George, J. F., Duffy, K., & Ahuja, M. (2000). Countering the anchoring and adjustment bias with decision support systems. Decision Support Systems, 29(2), 195-206.
• Epley, N., & Gilovich, T. (2006). The anchoring-and-adjustment heuristic: Why the adjustments are insufficient. Psychological science, 17(4), 311-318.