Cognitive Biases and Their Impact - 3 (Anchoring Bias)
Anchoring Bias
Explanation:
Anchoring bias is a cognitive tendency that influences our decision-making process. It occurs when we give excessive importance to the initial information we come across when making judgments or choices. Essentially, this initial information becomes a mental "anchor" that influences subsequent decisions, often overshadowing other relevant information.
Example:
Consider a parent-teacher conference to illustrate this bias in an educational context. Suppose a teacher, during the conference, first hears about a student's challenging behaviour, such as disciplinary issues or classroom disruptions. This initial negative information becomes the anchor. Even if there are positive aspects to that student's performance, the teacher may unintentionally fixate on the negative behaviour and form an overall negative perception of the student. This bias could lead to underestimating the student's potential or not fully recognising their strengths.
Experiment by Amos Tversky and Daniel Kahneman:
In a classic economics experiment from the 1970s, researchers Amos Tversky and Daniel Kahneman conducted a study involving real estate. They presented real estate agents and homebuyers with the task of estimating the value of a house. Here is how it worked:
Participants were divided into two groups. One group was given a higher "anchor" price for the house, while the other received a lower one. Despite being shown the same house, those who received the higher anchor price consistently estimated the house's value as significantly higher than those who received the lower anchor.
This experiment vividly illustrates how an initial reference point, in this case, the anchor price, can wield a powerful influence on subsequent decisions and negotiations in economic settings.
Goods and Services Tax (GST) in 2017:
Anchoring Bias can also be observed in political decision-making, as exemplified by India's introduction of the Goods and Services Tax (GST) in 2017. The debate around setting tax rates for different goods and services illustrates:
During the GST implementation, policymakers extensively discussed the appropriate tax rates for various items. Various industries and states had their preferences and actively lobbied for specific rates.
The presence of the Anchoring Bias is evident in how these rates were determined. Once a particular tax rate was proposed, it often became an anchor point for further negotiations. Policymakers and interest groups consistently referred to these initial proposals as benchmarks for subsequent discussions. This anchoring effect notably influenced the final GST rates assigned to different goods and services, potentially impacting various sectors and consumers differently.
These examples underscore how the Anchoring Bias can shape decisions in both economic and political contexts. It does so by introducing reference points that profoundly influence subsequent judgments and negotiations, affecting outcomes and perceptions.
Impact:
In schools, anchoring bias can have tangible consequences. When educators, administrators, or decision-makers anchor their judgments or decisions based on limited or initial information, it can result in insufficient resource allocation. For example, if a school board anchors their budget decisions to a high initial cost estimate for a project without thoroughly evaluating the actual needs and potential cost-saving opportunities, it can lead to overspending. Contrarily, they may underestimate the resources needed for critical projects if they anchor to a lower estimate without considering essential requirements. This bias, therefore, can contribute to financial inefficiencies within educational institutions.
Comments