A jacket marked down from £120 to £70 feels like a bargain. A jacket simply priced at £70 feels like a jacket. Same jacket, same money. The only difference is the number you saw first, and that number has quietly done all the work.
📚 What you need to know
A cognitive bias is a faulty or distorted way of understanding the world.
Biases work as heuristics — mental shortcuts that make decisions fast but often inaccurate.
Anchoring bias is when a decision is shaped by the first piece of information you are given, the anchor.
People adjust away from the anchor, but they never adjust enough.
A high anchor produces high estimates; a low anchor produces low ones.
Salespeople, politicians and the media all exploit this deliberately.
The study you need is Kahneman & Tversky (1974).
Shortcuts have a price
You cannot think carefully about everything. If you weighed up every decision properly you would never leave the house. So the brain uses shortcuts, and most of the time they work well enough. Anchoring is the bill for that speed.
The anchor does not have to be sensible, or accurate, or even relevant. It just has to arrive first. Once it has, it locks a rough range into your mind and everything after that gets judged against it.
How retailers use it
A laptop is shown at £800. That becomes its ‘true’ value in your head, even though no object has an inherent price.
A ‘discount’ to £700 now feels like saving £100 — when the thing may have cost £200 to make.
Some shops build artificial anchors, marking an item as reduced from a price it was never actually sold at.
The result is a false sense of having got a bargain, which makes people feel like savvy shoppers rather than customers who just spent money.
The trap in the maths. A dress reduced from £75 to £50 feels like a £25 saving. But you have not saved £25 — you have spent £50 you might never have spent at all. Anchoring makes spending feel like saving.
Key study: Kahneman & Tversky (1974)
The cleverest thing about this study is that both groups were given exactly the same sum. Only the order changed.
Part of the study
What happened
Aim
To test whether anchoring bias affects how people estimate a final answer.
Participants
High school students aged 16 to 18.
Procedure
Participants were randomly allocated to one of two groups and asked to estimate the answer to a multiplication. The ascending group saw 1 × 2 × 3 × 4 × 5 × 6 × 7 × 8. The descending group saw 8 × 7 × 6 × 5 × 4 × 3 × 2 × 1. They had 5 seconds to answer, so there was no time to actually work it out.
Results
The ascending group gave a mean estimate of 512. The descending group gave a mean of 2,250. The correct answer, for both, is 40,320.
Conclusion
Estimates were strongly pulled by the starting value. A low anchor produced low answers and a high anchor produced high ones.
The gap between 512 and 2,250 is the anchoring effect. The gap between both of them and 40,320 shows how badly the shortcut fails.
Do not skip the correct answer. Quoting 40,320 shows the examiner that you understand two separate points: the anchor moved the estimates, and insufficient adjustment left both groups miles out.
Evaluating anchoring bias
What is strong about it
It applies directly to sales and retail, which gives it clear external validity — you can see it operating on any high street.
Knowing about it can stop people making expensive mistakes. Some research suggests that being in a good mood protects against it, which is a decent argument for not shopping when you feel low.
The experiment is simple, controlled and easy to replicate.
What is weaker about it
Research here is almost entirely lab-based, so it lacks mundane realism — estimating a multiplication in five seconds is nothing like choosing a laptop.
People are more sophisticated than the theory suggests. Plenty of shoppers know exactly what a retailer is doing and buy the thing anyway.
The sample was school students, who may be less experienced at estimating than adults who deal with numbers daily.
Link to concepts
Perspective: anchoring is a cognitive construct, built on information processing and sometimes on deliberate thought. But it does not explain decisions made with almost no thinking at all. Impulse buying may be better explained by the scarcity principle from the evolutionary approach — humans are thought to be wired to compete for scarce resources, which is what ‘while stocks last’ and ‘last chance to own’ are exploiting.
Change: today’s consumers know more about marketing than any previous generation, and it barely helps. Retailers simply adapt, using tactics like the dummy offer: one poor-value option, one expensive one, and one ‘amazing’ middle choice that the seller wanted you to pick all along.
EXAM PRACTICE
Explain one cognitive bias, with reference to one study. [9]
Step 1: define the bias
Anchoring bias: judgements are pulled towards the first piece of information given, and people adjust away from it insufficiently.
Step 2: explain why it happens
It is a heuristic. Shortcuts save cognitive effort, but the saving costs accuracy.
Step 3: the study
Kahneman & Tversky (1974). Two groups, the same eight numbers, 5 seconds to estimate.
Step 4: the numbers that prove it
Ascending 512, descending 2250, correct answer 40,320.
Step 5: evaluate
Strong application to retail, but lab-based with low mundane realism, and it underestimates how aware consumers are.
Bias + mechanism + study + figures + evaluationThree numbers, one sentence each. That is the whole results section.
💡 Exam tip
Define heuristic early. It links anchoring to every other bias on the course.
Say insufficient adjustment. People do move away from the anchor — just not far enough.
Retail examples are fine as illustration, but the marks come from the study.
The scarcity principle is a strong alternative explanation. Offering one shows real evaluation.
Mundane realism is the precise term for the lab criticism. Use it rather than ‘unrealistic’.
⚠ Common mix-up
Saying the two groups got different sums. They were identical — only the order differed.
Forgetting 40,320. Without it you cannot show how far off both groups were.
Confusing anchoring with confirmation bias. Anchoring is about the first number; confirmation bias is about protecting an existing belief.
Calling the anchor a ‘trick’ only. It works even when the anchor is random and the person knows it.
Saying biases are always bad. Heuristics exist because they usually work; the cost is occasional large errors.
Up next: Confirmation Bias: Seeing What You Expect — the bias that decides which evidence you even notice in the first place.
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