Skip to main content

Anchoring Effect

Go Search
New Atlas
Atlas, A-Z
Atlas Maps
MPP/MPA Programs
Core Topics
Illustrative Courses
Topic Encyclopedia
Concept Dictionary
Career Tips
Best Practices Project

Anchoring Effect 

A term used to describe the common human tendency to rely too heavily, or "anchor," on particular piece of information when making decisions.


 The anchoring effect is an important source of cognitive bias. Thaler and Sunstein explain how the anchoring effect biases our judgement in their book Nudge. They write (slightly modified for brevity):

"Suppose we are asked to guess the population of Milwaukee. Neither of us knows much about Milwaukee, but we think it is the biggest city in Wisconsin. How should we go about guessing? Well, one thing we could do is start with something we do know, which is the population of Chicago, roughly three million. So we might think, Milwaukee is a major city, but clearly not as big as Chicago, so, hmmmm, maybe it is about one-third the size, say one million. Now consider someone from Green Bay, Wisconsin, who is asked the same question. She also doesn't know the answer, but she does know that Green Bay has about one hundred thousand people and knows that Milwaukee is larger, so guesses, say, three times larger - three hundred thousand.

This process is called 'anchoring and adjustment.' You start with some anchor, the number you know, and adjust in the direction yhou think is appropriate. So far, so good. The bias occurs because the adjustments are typically insufficient. Experiments repeatedly show that, in problems similar to our example, people from Chicago are likely to make a high guess (based on their high anchor) while those from Green Bay guess low (based on their low anchor). As it happens, Milwaukee has about 580, 000 people."


Important Notices
© University of Toronto 2008
School of Public Policy and Governance