Archive for August 4th, 2014

August 4, 2014


daniel kahneman

Zillion Dollar Frittata

Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the ‘anchor’) when making decisions. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth.

Anchoring is also called the focusing effect (or focusing illusion) because it occurs when people place too much importance on one aspect of an event, causing an error in accurately predicting the utility of a future outcome. Individuals tend to focus on notable differences, excluding those that are less conspicuous, when making predictions about happiness or convenience.

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