The new anchoring effect in behavioral economics
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This document summarizes three studies that examined how incidental environmental anchors, or irrelevant numbers in the environment, can influence judgment and decision making. The studies found that: 1) Participants judged a basketball player wearing jersey #21 as likely to perform better than the same player wearing #8. 2) Participants estimated that the fictitious smartphone model P97 would outsell model P17, even though the models had identical features. 3) Participants were willing to pay more, on average $32.84 versus $24.58, for a meal at a restaurant identified as Studio 97 versus Studio 17. The document concludes that the presence of irrelevant numbers can exert a robust influence on decisions
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The new anchoring effect in behavioral economics
- 1. How Random Numbers affect our Decision Making Incidental Environmental Anchor Effect A paper by Clayton R Critcher and Thomas Gilovich Cornell University, New York, USA Journal of Behavioral Decision Making - 30 Oct, 2008
- 2. Incidental Environmental Anchor Effect โข A potential biasing no. in environment at time of judgement exerts assimilative influence on judgement โข A no. which is irrelevant to judgement 3 study experiments were conducted to examine the impactโof a this new type of โโbasicโโ anchoring effect. One that is likely to be more robust than those reported in the existing literature. 2 5 9
- 3. Jersey Number Affects Judgment Study 1 >21 โข Ques: How likely do you think an unknown player Stan (in jersey no. 21) will have a better performance than the same Stan (in jersey no. 8) โข Result: Stansโ (in jersey 21) future performance was assessed to be better than Stan (in jersey 8) 256 undergrads at Cornell University completed the study as part of a session for which they received extra course credit. Participants saw one of two possible photos, with Stan Fischer wearing either jersey number 54 or jersey number 94
- 4. Model Number Affects Judgement โข Ques: Will Sony Ericsson P97 model outperform the sales of Sony Ericsson P17 in the United States (both with exactly same features) โข Result: Participants estimated more P97s will be sold than P17 Study 2 > Model 97 Model 17 256 undergrads at Cornell University completed the study as part of a session for which they received extra course credit. Participants saw a picture of a Sony Ericsson smartphone with either the fictitious model number โโP17โโ or โโP97โโ superimposed on the phoneโs display. Participants read some background information about the features of the fictitious product before being told there were plans to introduce the P17 [P97] in the USA
- 5. Restaurant No. Affects Spending Decision โข Ques: Estimate how much will you be willing to spend on your own meal if you were to eat at this restaurant (Studio 97 vs Studio 17) โข Result: In Studio 97 participants were willing to pay significantly more for their dinner ($32.84) than Studio 17 ($24.58). Study 3 > 194 Cornell University undergraduates completed the study as part of an experimental session. All participants received the same picture of a moderately up-scale restaurant that. To the side of the picture, the restaurant was either identified as Studio 17 or Studio 97. Studio 97 Studio 17
- 6. Incidental Environmental Anchor Effect - Robust โข The presence of a no. in the environment, even one completely unrelated to the judgment at hand, exerts a direct influence on decision making โข The influence of incidental environmental anchors is fairly robust Main Findings
- 7. Product Branding Potential Usages of this Anchoring effect 1000 --------- 2000 -------- 5000 Light --------- Medium -------- Strong Beer Brand name Suffix โข To influence (and inform) customers that one sub-brand variation is stronger than the other (in products where strength is a differentiator) eg beer โข These numbers do not have any specific significance except informing about the alcoholic strength
- 8. Street Numbering for Realty Developer Potential Usages of this Anchoring effect โข To influence prospective home buyers to a new neighbourhood and pay higher price the developer can brand the street name with a high number street (or higher street no. than the neighbouring streets) eg 72nd Grand Ave. โข Although the street number will not have any specific significance but it will still influence the buyer to believe it a more exclusive neighbourhood Street No. ------------- High numerical value
- 9. Disaster Management โข Hurricanes are generally given affable names like Katrina โข To influence residents of the affected area regarding the potential severity a random no. can be added eg Katrina 276 โข This may influence more potential victims to seek shelter and safe ground, thus save lives Potential Usages of this Anchoring effect Hurricane Katrina 276
- 10. Thank You PS: I hope the anchoring number 1, as design element of each slide will influence your decision as well!
Editor's Notes
- 72308 - The objective of this presentation is to simplify the concept in a way that Dan Ariely does, to make it seem non-technical and edu-taining to a regular TED Talks audience. The presentation is not meant for a behavioral scientists conference, who would be expecting in-depth details.
- A potentially biasing number is present in the environment at the time of judgment, one that is not informative in any meaningful way with respect to the judgment at hand. Nevertheless, we propose that for a variety of judgments that require people to pull a numerical answer โโout of thin air,โโ these incidental environmental anchors will exert an assimilative influence on judgment. Virtually all existing demonstrations of anchoring involve paradigms in which a personโs attention is called to the anchor value and the context or procedure ensures that the person devotes some thought to it. (Tversky and Kahneman, 1974), Basic anchoring involves instances in which โโ. . .peopleโs judgments of a target are influenced by an anchor that is completely uninformative and people are not asked to consider the anchor as a possible target valueโโ. Wilson and colleagues call basic anchoring (Wilson, Houston, Etling, & Brekke, 1996). With incidental environmental anchors, a personโs attention is not explicitly directed to the anchor value and the value is completely irrelevant to the judgment at hand. subliminal anchoring Mussweiler and Englich (2005) subliminally flashed either high or low numbers to participants while they were thinking about how much the average German car cost. Participantsโ answers were drawn toward the anchor.Reitsma-van Rooijen and Daamen (2006) found that subliminal anchoring only affected judgments when participants were forced to respond quickly. This could either be because the subliminal anchoring effects were short-lived, or because the absence of time pressure allowed participants to consider information that overrode the weak influence of the subliminal anchor. Either way, subliminal anchoring appears to be a rather fragile phenomenon. We expect incidental environmental anchors to have a more robust effect because of their continued, supraliminal presence during deliberation and judgment. Our goal instead was to document the existenceโand examine the impactโof a new type of โโbasicโโ anchoring effect. One that is likely to be more robust than those reported in the existing literature.
- In trying to choose between these two players, is it possible that something as arbitrary as their transposed jersey numbers could color fansโ assessments of the value they are likely to derive from โโowningโโ each player? To determine whether an uninformative jersey number can indeed affect judgments of an athlete, we had participants make judgments about a linebacker whose jersey number had been digitally altered to read 54 or 94 Two hundred sixty-five undergraduates at Cornell University completed the study as part of a session for which they received extra course credit. Participants saw one of two possible photos, with Fischer wearing either jersey number 54 or jersey number 94. Participants were then asked โโhow likely do you think it is that Stan Fischer will register a sack in the conference playoff game?โโ, which they answered by providing a percentage estimate in a blank space on the page. Because Wilson et al. (1996) found that basic anchoring effects were muted or eliminated for participants who were experts in the domain under investigation, we also asked participants about their level of football expertise. Quarterback, participantsโ assessments of โโStan Fischerโsโโ future performance were nevertheless influenced by the number displayed on his uniform. Thus, greater familiarity with the content domain, even if not with the specific target of judgment, appears not to immunize people from the pull of incidental environmental anchors.
- Tested whether model numbers might also bias judgments about the product that are unrelated to the dimensions of quality or novelty. The phone was described either as model number โโP17โโ or โโP97โโ, and we examined whether participantsโ sales forecasts would be influenced by the incidental anchor contained in the model number. Two hundred seven Cornell University undergraduates participated in exchange for either a piece of candy or as part of an experimental session for which they received extra credit in their psychology or human development classes. Specifically, they were asked โโwhat percentage of the Sony Ericsson P17s [P97s] sold during the initial introduction period will be purchased in the United States, as opposed to Western Europe?โโ Participantsโ responses were influenced by numbers incidentally associated with the targetโ numbers that should have no bearing on the value being estimated.
- In this study, we wanted to move beyond the influence of incidental environmental anchors on percentage estimates and examine whether they also influence peopleโs assessments of how much they would be willing to spend on a product. We had two additional aims. First, we investigated whether calling participants attention to the incidental environmental anchor just before they made their judgments would eliminate the anchoring effect. Second, we examined whether incidental environmental anchors exert their biggest effects on participants who paid the greatest attention to the anchor values. One hundred ninety-four Cornell University undergraduates completed the study as part of an experimental session for which they received extra course credit. All participants received the same picture of a moderately up-scale restaurant that had supposedly been copied from a magazine advertisement. To the side of the picture, the restaurant was either identified as Studio 17 or Studio 97. Highlight condition: Under the pretext that the bottom half of the page would be torn off, participants in the highlight condition were asked to circle which of two restaurants they were evaluating (either Studio 17/97 or โโRestaurant Mon Jardinโโ). This served to draw participantsโ attention to the anchor just before making the judgment. Estimate how much they would be willing to spend on their own meals if they were to eat at this restaurant. that those who saw Studio 97 were willing to pay significantly more for their dinner ($32.84) than were those who saw Studio 17 ($24.58). First, participants whose attention was drawn to the anchor value just before making their willingness to pay judgments were every bit as susceptible to the anchorโs influence as other participants. Second, participants who could not recall the anchor moments after returning the questionnaire were nonetheless susceptible to the anchorโs pull. This possibility fits with Reitsma-van Rooijen and Daamenโs (2006) finding that subliminal anchors only influenced judgment when participants were rushed, which presumably gave them less time to generate additional judgment-relevant information that might have dampened the impact of the subliminal anchor.
- Across three studies, incidental numbers present in the environment influenced participantsโ estimates of uncertain values. Highlighting the anchor just before the time of judgment did nothing to diminish the magnitude of the anchoring bias The effect of incidental environmental anchors may be more robust than the typical basic anchoring effect (Brewer & Chapman, 2002; Epley, 2004). Incidental environmental anchors, in contrast, are present in the environment at the moment of judgment and thus may not require the same level of processing to exert an influence. Thus, it seems that the influence of incidental environmental anchors is fairly robust and not limited to situations in which little or no information pertinent to the judgment is available. The presence of a number in the environment, even one completely unrelated to the judgment at hand, may increase the accessibility of the anchor value, thereby exerting a direct influence on numeric responding. Incidental environmental anchors give rise to a type of basic anchoring effect that appears to be more robust than those documented in the existing literature.
- While the areas of where the concept of Incidental Environmental Anchor can be harnessed are numerous โ sports, product and service branding, UX design (influencing choice), model no., disease management; I have chosen three specific examples where the effect can be implemented.
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