Opinion · Psychology · Cognitive Bias
A jacket hangs on a rack with two prices on its tag. The first, $39, has a thin line through it. The second, $19.99, is printed in red. Most of us feel the pull before we have even touched the fabric: this is a good deal. But notice what we have not done. We have not asked what the jacket is worth. We have only measured how far $19.99 sits below $39, and let that distance do the thinking.
That small moment is one of the most studied effects in psychology. It has a name, anchoring, and once you see how it works, you start noticing it in places far more consequential than a clothing rack.
What anchoring actually is
The simplest way to put it: the first number you see gets imprinted, and every number that comes after it gets judged against that first one. It does not matter much whether the first number was meaningful. Even when it is obviously random, it is the one that comes to mind first, and it quietly becomes the reference point.
The part that makes anchoring more than a curiosity is what happens next. We do not just compare against the anchor. Our judgment gets pulled toward it. The classic demonstration comes from Amos Tversky and Daniel Kahneman’s 1974 paper on judgment under uncertainty. Participants watched a wheel of fortune land on a number, 10 for one group and 65 for the other, and were then asked what percentage of United Nations member countries were in Africa. Everyone knew the wheel had nothing to do with the question. Yet the group that saw 10 gave a median estimate of 25 percent, and the group that saw 65 answered 45 percent.
Both groups adjusted. Nobody simply repeated the wheel’s number. They started from the anchor, moved away from it, and then stopped too early, while they were still in its neighborhood. That pattern, called anchoring and adjustment, is the same mechanism behind a quieter bias I looked at earlier, the spotlight effect, where people correct for their own point of view but not quite enough.
One small refinement: the anchor does not strictly have to be the very first number. It is whichever number is most prominent in your mind at the moment you decide. In practice, that is usually the first one you were shown, which is exactly why whoever controls the first number holds so much power.
Three places the anchor does its work
Anchoring is easy to demonstrate in a lab. The more useful question is whether it survives in the real world, where money and stakes are involved and people have reasons to be careful. Three very different settings suggest it does.
1. The price tag, and what happens when you remove it
The strikethrough price is anchoring in its most familiar form. The crossed-out $39 is not information about the jacket so much as an instruction about how to feel about $19.99. The same logic shows up at a much larger scale, as when a company’s value crosses a round number like one trillion dollars and suddenly reads as a milestone, a pattern I explored in AMD’s $1 trillion moment.
The strongest evidence for how much shoppers rely on anchors comes from a retailer that tried to live without them. In 2012, J.C. Penney replaced its constant sales and coupons with a “fair and square” everyday-pricing strategy. The prices were arguably more honest, but shoppers no longer had a higher “original” price to measure their savings against. Harvard Business Review reported that store traffic fell by 10 percent and sales by more than 20 percent within months. For the full year, sales fell 24.8 percent and the company lost $985 million, and its CEO announced that sales and coupons were coming back. Removing the anchor did not make prices feel fair. It made them feel unmoored.
2. The salary negotiation, and who names the number first
Job interviews contain one of the most common anchoring moves in everyday life: “What are your salary expectations?” In my view, companies ask this first for exactly the reason anchoring predicts. Whatever number the candidate says becomes the reference point for everything that follows.
At first this looks like a strange strategy, because negotiation research usually favors the side that speaks first. Adam Galinsky and Thomas Mussweiler’s work on first offers as anchors found that opening offers strongly shape the final deal, and later reviews note that the extremity of a first offer often explains more than half the variance in outcomes. So why would a company hand the candidate the anchor?
Because most candidates are already anchored before the conversation begins. They tend to answer based on what they earn now, adding a modest raise on top. Their number is not a bold opening position. It is the output of an anchor they set on themselves, and it can quietly become the ceiling of the negotiation. This is part of why several U.S. jurisdictions now restrict questions about pay history. New York’s salary history ban, for example, is framed around breaking the cycle in which a lower starting wage follows people from job to job. The lesson is less “never speak first” and more “know where your own number came from before you say it.”
3. The experts who said they were not influenced
It would be comforting to think experience protects us. A 1987 study by Gregory Northcraft and Margaret Neale suggests otherwise. They had students and working real estate agents tour real houses and estimate their value. Everything was identical across groups except the listing price shown in the information packet.
Both amateurs and professionals moved their estimates in line with the listing price. The striking part was how they explained themselves. More than half of the students said the listing price had factored into their judgment. Among the agents, only about a quarter mentioned it, and just 14.3 percent counted it among their top three considerations. The experts were anchored just like everyone else. They were simply less likely to notice it.
The common structure
A shopper, a job candidate, and a real estate agent have little in common, but their situations share a shape. In each case the true value is hard to pin down. What is a jacket worth? What is your work worth to a company you have not joined yet? What is this particular house worth this month? When the answer is uncertain, the mind reaches for any available reference point, and the first prominent number is always available.
That suggests two practical rules. First, anchors are strongest where our own knowledge is weakest, so unfamiliar purchases and first-time negotiations deserve extra suspicion. Second, being aware of anchoring does not switch it off. The Tversky and Kahneman participants knew the wheel was random. The real estate agents were professionals. The effect happened anyway. What helps is not willpower but preparation: forming your own estimate before you see anyone else’s number.
There is also a quieter point in the J.C. Penney story. Anchors are not purely a trick played on consumers. People seem to want them. A price without a reference point is harder to evaluate, and harder to feel good about. That is why anchors are unlikely to disappear from shelves, job offers, or listings anytime soon, and why learning to spot them is more useful than hoping they go away.
A question to carry with you
The next time a number arrives before you have had a chance to think, whether it is a crossed-out price, an asking price, or a question about your salary expectations, try asking one thing before you respond: who put this number in front of me first, and would I have landed anywhere near it on my own?
If the honest answer is no, the number is not information. It is an anchor, and you are allowed to pull it up.
Editorial note: This piece started from studying a psychology concept rather than from a news trend. The core explanation reflects my own understanding of anchoring, supported by the published research linked above.