This week’s book learning is from ‘Thinking, Fast and Slow’ by Daniel Kahneman.
Visitors to the San Francisco Exploratorium were asked one of the following 2 questions –
Is the height of the tallest redwood more or less than 1200 feet?
Is the height of the tallest redwood more or less than 180 feet?
The average answer for group 1 was 844 feet and group 2 was 282 feet. (Real average is around 300 ft)
In numerical terms, the anchoring index or
% difference between the 2 average heights (844-282=562)/ Difference between the “anchors” (1200 feet – 180 feet) was 55%.
And around 50% deviation is the norm in almost all experiments! Let’s take a simple example –
A supermarket offered Campbell soup at 10% discount. For half the day, the sign said “Limit of 12 per person” and then “No limits per person.” Shoppers purchased 7 cans when the limits were enforced i.e. an amazing twice as many as they bought when the limit was removed!
Image by Navin Rajagopalan
Anchoring is a continuation of “priming“. It essentially confirms that we are hugely swayed by hints and signals – much more than we can even imagine. Next week, we will look at the effects of anchoring on price-setting and negotiations..
Here’s to looking out for anchoring effects in supermarkets this week!
A Learning a Day 
