the anchoring effect

What is the Anchoring Effect?

The anchoring effect is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.

Why are first offers so influential in negotiation? In their groundbreaking research about the anchoring effect, psychologists Daniel Kahneman and Amos Tversky showed that when we’re asked to make a judgment in the face of uncertainty, we are easily swayed by the first figure that’s introduced into the conversation, however irrelevant, outrageous, or insulting it may seem.

The first number serves as an “anchor” that’s almost impossible to forget. Not surprisingly, then, that negotiation research consistently shows that the person who makes the first offer typically comes out ahead, price-wise.

This anchoring effect leads us not just to give too much weight to the first number put on the table, but also to inadequately adjust from that starting point.

When your counterpart has dropped an anchor, the first and perhaps most important step is to recognize the move, since you can’t defend against something that you don’t see coming.

The price anchoring effect has strong implications for price anchoring in negotiation. For example, if you enter a job interview hoping for a salary of $75,000, but the interviewer only offers you $50,000, you may find yourself making a counteroffer of $55,000—far less than the $80,000 you would have asked for if you had made the first offer.

If you want to learn more about the anchoring effect and salary negotiations, download our free special report, How to Negotiate Salary: Learn the Best Techniques to Help You Manage the Most Difficult Salary Negotiations and What You Need to Know When Asking for a Raise. Salary negotiations are often stressful and challenging. But with the right strategies, you can negotiate your employment terms with ease.

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