The first number on the table pulls the final number toward it, even when everyone in the room knows the first number is arbitrary. That is anchoring. It is one of the better-replicated effects in judgment research, and it matters most where money changes hands.
What anchoring is and where it came from
Anchoring is the tendency to make a numerical estimate that stays close to a value you saw first, even when that value has no bearing on the question. Tversky and Kahneman (1974) described it as part of a wider account of how people judge under uncertainty. Their best-known demonstration used a wheel of fortune that was rigged to stop at a fixed number. Participants saw that number first and then estimated the share of United Nations countries in Africa. Estimates after a low number came out well below estimates after a high number, even though participants knew the wheel was random.
Tversky and Kahneman explained the pattern as anchoring and adjustment. People start from the anchor and adjust away from it, but they stop too early. Epley and Gilovich (2006) reviewed evidence that this adjustment is typically insufficient, and that the anchor keeps shaping the answer even when people try to correct for it.
The paradigm most later studies use comes from Jacowitz and Kahneman (1995). Participants first answer a comparison question with either a high or a low reference value, such as whether a quantity is above or below a given figure. They then give a point estimate. Participants who received the high reference gave systematically higher estimates than those who received the low one. The design is simple, which is one reason it has been reused so often.
The original evidence and what replicated
Three studies carried the anchoring effect from the laboratory into business. Northcraft and Neale (1987) gave students and professional real estate agents the same house, with a listing price that varied between versions. Estimates of the property’s value moved with the listing price in both groups. The agents, who believed they were immune to such cues, still moved with it.
Ariely, Loewenstein and Prelec (2003) asked students to write the last two digits of their social security number before bidding on consumer goods. Students whose numbers were high bid considerably more for the same items than students whose numbers were low. The authors called the pattern “coherent arbitrariness”: the anchor sets the price level, and later preferences stay consistent with it, even though the preferences were never stable to begin with.
Galinsky and Mussweiler (2001) studied negotiations in which one side made the first offer. First offers pulled final outcomes toward themselves, and the size of that advantage depended on the negotiator’s focus and perspective-taking. The lesson for practitioners is that the first-offer advantage is real but not fixed.
Replication is the strongest part of the case. Many Labs 1 (Klein et al., 2014) included the Jacowitz and Kahneman paradigm across several laboratories. Coverage of the project reports that the anchoring result replicated robustly, and that it stood out among the classic effects tested, many of which replicated with smaller effects than the originals. I could not verify the exact effect sizes from the paper for this guide, so I state the result qualitatively. Two caveats matter. A robust effect in estimation tasks is not the same as a large effect in a market, and the replication crisis discussion in behavioural science replication explains why single studies should be read with care.
Anchoring in pricing and negotiation
Reference prices are the most common anchor in retail. A tag that reads “was 199, now 149” makes 199 the reference, and the discount is judged against that reference rather than against what the product is worth. Whether the original price was ever real is a separate question of fairness. The anchoring mechanism works either way, because shoppers evaluate the price against whatever number came first.
Price lists also create anchors through their order. A very expensive option placed at the top of a menu or pricing page makes the options below it look moderate. This is anchoring operating through a list, and it is related to the decoy effect, though the two are distinct: anchoring concerns a numerical reference point, while decoys change preferences between options that remain on the table.
In negotiation, the rule is blunt. Whoever names the first number defines the range. If you open a salary conversation with a figure, the final offer tends to land nearer your figure than it would otherwise. If the other side opens, your counter is pulled toward their number, even when you prepared your own. Preparation is therefore the main defence, because a number you have already built from evidence competes with the anchor instead of trailing it.
Budgets work the same way. A client who writes a budget into a request for proposals sets the figure that bidders converge on, whether or not the budget reflects the real cost. Vendors who see the number first often price their proposals near it. Procurement teams that publish a budget range before they know the market rate are, in effect, choosing their anchor.
Real estate and used-car sales show the same pattern. The listing price shapes the buyer’s valuation, and sellers who list high often get offers that are higher than the market would otherwise support, although the size of that gain varies widely by market and is not something this guide can quantify.
Outside the market, anchoring shows up in suggested amounts. Donation forms that propose a set of fixed amounts can pull gifts toward the suggested figures, and I could not verify the size of that pull for this guide. Restaurant wine lists work similarly. A very expensive bottle at the top makes a bottle in the middle feel like the sensible choice, whatever it costs. None of these examples needs a hidden motive to work. The first number does the job by being the first number.
Anchoring also operates across time. A price that a customer saw last quarter becomes the reference for this quarter, so a price rise that looks small against the previous list price can feel large against the price the customer first paid. Teams that plan price changes should therefore think about which number their customers will remember, not only about the new number on the page.
How to reduce anchoring
Anchoring is hardest to resist when the anchor is the first thing you see. The table below sets out common situations, the anchor that usually appears, and a move that puts your own estimate first.
| Situation | Typical anchor | Counter-move before you look |
|---|---|---|
| Buying with a list price | The listed price | Estimate value from comparable sales or costs, and write it down |
| Salary or contract negotiation | The first number spoken | Set your range before the meeting, and name a number with a stated rationale |
| Project budget review | The budget owner’s figure | Collect two independent estimates, then compare them with the anchor |
| Setting your own price | A competitor’s or last year’s price | Test willingness to pay with several framings, not one reference figure |
| Reviewing a forecast | The previous forecast | Rebuild the forecast from drivers, then ask what it would be with no prior figure |
The moves share one principle: produce your own number before you see the other one. Once an anchor is in your head, adjusting from it feels like reasoning, and that feeling is the problem. A second principle follows from the research on insufficient adjustment. If you must work from someone else’s number, treat it as a hypothesis, and ask what evidence would move you away from it.
Where this leaves the practitioner
In my view, most advice about anchoring in business is too cheap. It says to open high or to lead with a strong number, without explaining how anyone knows what a strong number is. The useful fix is preparation: build an estimate from comparable evidence before the other side speaks, and treat every number you did not produce as a claim to test. The open research question is size. We have robust laboratory evidence, but I could not verify a pooled estimate of how much anchoring moves negotiated prices in real markets, and that gap is where the next good studies belong.
If your team sets prices or negotiates contracts, the applied behavioural science guide for business shows how to build these checks into existing processes.
Frequently asked questions
Is anchoring the same as the decoy effect?
No. Anchoring is about a numerical reference point that shapes a later estimate or offer. The decoy effect is about a third option that changes the relative appeal of two others. Pricing pages often use both, which is why they are easy to confuse.
Does knowing about anchoring protect you from it?
Knowing the name of the bias is not a reliable defence on its own. In my reading of the literature, process changes do more, such as forming an independent estimate before seeing a figure, or using a second estimator who has not seen the anchor.
How large is the anchoring effect in pricing?
The size varies by setting. The original laboratory effects were large, and the multi-laboratory replication reported the effect as robust. I could not verify a pooled effect size for pricing or negotiation, so any single percentage you read about should be checked against its source before you plan around it.
References
Ariely, D., Loewenstein, G., & Prelec, D. (2003). “Coherent arbitrariness”: Stable demand curves without stable preferences. The Quarterly Journal of Economics, 118(1), 73-106. https://doi.org/10.1162/00335530360535153
Epley, N., & Gilovich, T. (2006). The anchoring-and-adjustment heuristic. Psychological Science, 17(4), 311-318. https://doi.org/10.1111/j.1467-9280.2006.01704.x
Furnham, A., & Boo, H. C. (2011). A literature review of the anchoring effect. The Journal of Socio-Economics, 40(1), 35-42. https://doi.org/10.1016/j.socec.2010.10.008
Galinsky, A. D., & Mussweiler, T. (2001). First offers as anchors: The role of perspective-taking and negotiator focus. Journal of Personality and Social Psychology, 81(4), 657-669. https://doi.org/10.1037/0022-3514.81.4.657
Jacowitz, K. E., & Kahneman, D. (1995). Measures of anchoring in estimation tasks. Personality and Social Psychology Bulletin, 21(11), 1161-1166. https://doi.org/10.1177/01461672952111004
Klein, R. A., Ratliff, K. A., Vianello, M., et al. (2014). Investigating variation in replicability: A “Many Labs” replication project. Social Psychology, 45(3), 142-152. https://doi.org/10.1027/1864-9335/a000178
Northcraft, G. B., & Neale, M. A. (1987). Experts, amateurs, and real estate: An anchoring-and-adjustment perspective on property pricing decisions. Organizational Behavior and Human Decision Processes, 39(1), 84-97. https://doi.org/10.1016/0749-5978(87)90046-X
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131. https://doi.org/10.1126/science.185.4157.1124