How Initial Impressions Influence Our Choices

Written by Arshnoor


Have you ever had the following experience: you go to a store and the salesperson tells you that you would not get a product, say a laptop, for less than $1000? The salesperson then shows you a laptop worth $950, and suddenly you think this is a great price and proceed to buy it. This process is termed as ‘anchoring’, a bias where people make decisions based on the first piece of information they hear, adjusting up or down from that starting point. (Bennett, 2014). Anchors can influence how much we are willing to pay for goods and services. If you set an initial anchor point where a new laptop would cost you about $1,000, you might seize the chance to get one for $950. You may not do enough research to learn that there are similar, far less expensive laptops available, because you are basing your decisions on the first anchor of $1,000 (Cherry, 2022).

Amos Tversky and Daniel Kahneman first proposed that people use anchoring as a decision shortcut (Epley & Gilovich, 2010). In their research, participants had to calculate the product of a lengthy list of numbers in a short amount of time. People would base their subsequent estimations on their initial calculations because they lacked the time to perform the actual math. People’s first anchor points affected their final responses (Cherry, 2022). Another study was conducted in which participants said they would be willing to spend more on a meal at Bistro 97 than Bistro 17 (Epley & Gilovich, 2010). You might be thinking: “how naive of someone to think that numbers such as 97 and 17 are related to how much money people would spend.” But that is anchoring at work: you unconsciously trust the primary information and base your decisions on that.

Anchoring affects both small and BIG decisions. Here’s an example of a small decision: when looking at a menu, the first item you see might set an anchor. If you see a steak priced at $30 first, you might perceive a $20 pasta dish as a bargain. Conversely, if the first item is a $10 salad, the $20 pasta might seem expensive. This means that initial impressions can influence the smallest decisions like what meal you are going to have. Now, let’s consider a big decision. There are two people selling houses. Seller A has an initial listing price of $500,000, which becomes an anchor for potential buyers. Even though buyers negotiate, they are likely influenced by this anchor. As a result, the final sale price, $450,000, is relatively close to the initial asking price, even though it represents a 10% reduction. For Seller B: A lower listing price of $450,000 acts as a different anchor. Buyers perceive this as a more realistic starting point. Consequently, the final sale price, $425,000, reflects a smaller percentage reduction of 5.6%. Therefore, the initial anchor influences BIG decisions like negotiating for a house.

There are many ways to avoid the effects of anchoring. First, be aware of the effect, but realize that conscious attempts to avoid anchoring-based decisions don’t always work (Cherry, 2022). Imagine you're at a restaurant and the credit card machine presents you with tipping options of 18%, 20%, and 25%. Understanding anchoring bias helps you recognize that these percentages are setting a psychological reference point, nudging you toward a higher tip. Second, make an argument against your anchor (Cherry, 2022). To avoid defaulting to one of the suggested tips, take a moment to think critically. Why are these specific percentages being suggested? Are they aligned with the service quality you experienced? And last, consider other options and second opinions. Before committing to a tip amount, consider what you would have tipped without the preset suggestions. Reflect on your typical tipping habits and whether they are appropriate for this situation. You may also choose to ask your family/friends about the quality of service or check the google reviews before tipping (Cherry, 2022). The human mind loves short-cuts, so exercise caution and carefully consider the factors that influence your decisions. To navigate anchoring-based decisions, we all must reflect on the primary anchor that shaped our decisions. This reflection ensures deliberate thought, which translates to better decisions.

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References

Adomavicius, G., Bockstedt, J. C., Curley, S. P., & Zhang, J. (2013). Do recommender systems manipulate consumer preferences? A Study of Anchoring Effects. Information Systems Research, 24(4), 956–975. https://doi.org/10.1287/isre.2013.0497

Bennett, M. W. (2014). Confronting cognitive anchoring effect and blind spot biases in federal sentencing: A modest solution for reforming a fundamental flaw. The Journal of Criminal Law and Criminology (1973-), 104(3), 489–534. http://www.jstor.org/stable/44113399

Cherry, K. (2022, January 22). Anchoring bias: Definition and examples. Explore Psychology. https://www.explorepsychology.com/anchoring-bias/

Epley, N., & Gilovich, T. (2010). Anchoring unbound. Journal of Consumer Psychology, 20(1), 20–24. https://doi.org/10.1016/j.jcps.2009.12.00 https://www.explorepsychology.com/anchoring-bias/

 

Disclaimer

The blog posts are for informational and educational purposes only. The posts should not be considered as any type of advice (medical, mental health, legal, and/or religious advice). All blog posts have been researched, written, and edited by the undergraduate students and alumni of the Lifespan Cognition Lab. As a teaching and research-based lab, we encourage all lab members to help make knowledge more accessible to all communities through these posts.

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