The anchoring heuristic is a cognitive bias in which decisions are strongly influenced by the first piece of information encountered, even if it is arbitrary or irrelevant. This initial reference point, known as the anchor, can irrationally shape judgments and estimates and subsequent judgments, even when more accurate or relevant information is available. Psychologists suggest this happens because people fail to adjust sufficiently from the anchor, which requires extra cognitive effort.

For example, imagine Emily is bidding on a painting at an auction. The auctioneer starts the bidding at $5,000, which becomes the anchor. Even though Emily initially planned to spend only $3,000, this starting price subconsciously influences her perception of the painting’s value, making her more likely to adjust her budget upward. She ends up bidding $4,500, influenced by the higher anchor, despite other comparable paintings selling for less.  This demonstrates irrational behavior, where anchoring overrides objective market comparisons.

Anchoring also appears in pricing strategies. A restaurant menu might list an expensive $50 entrée alongside more moderately priced $30 dishes. The high price is an anchor, making the $30 options seem more reasonable, even if they exceed the customer’s initial budget.

This heuristic can lead to overestimations or undervaluations in various situations. For example, when asked how long it takes to complete a task, a colleague might guess “three hours.” This estimate could anchor others’ expectations, and as a result, people may fail to reassess estimates due to the anchoring effect.

Awareness of the anchoring heuristic helps mitigate its effects. Awareness is useful but not always sufficient—strategies like deliberate counter-anchoring or breaking the decision into independent steps can help. Individuals can make more informed decisions by critically evaluating initial reference points and considering additional data. This approach ensures choices are based on comprehensive reasoning rather than undue influence from an arbitrary starting point.