Anchoring effects and modern elections

11 09 2012

I’m still reading “Thinking Fast and Slow”, and was fascinated by the description of what Kahneman refers to as the “anchoring effect”. Basically, how this works is that when you attempt to estimate something, you are influenced by information that you have recently received.

For example: he and his scientific colleague once rigged a wheel of fortune that was marked from 0 to 100 to stop at only 10 or 65, asked participants to spin the wheel, and then asked them to write down the number they just spun. They then asked two questions:

  • Is the percentage of African nations among UN members larger or smaller than the number you just wrote?
  • What is your best guess of the percentage of African nations in the UN?

The participants who spun 10 estimated the percentage of African nations as 25%, while those who spun 65 estimated that it was 45%. This difference is typical for most anchoring effects.

An obvious use of an anchoring effect is in price negotiations. If a realtor sets a high initial price for a house, bidders will tend to use this as the anchor, and may wind up bidding higher than they originally planned. (Though, in the Toronto housing market, competition is so fierce that an effective strategy is to give a low initial value in order to spur a bidding war.) The anchoring effect is so powerful that, when Kahneman teaches how to negotiate, he suggests that the only effective response to a high initial offer is to “make a scene, storm out or threaten to do so, and make it clear – to yourself as well as to the other side – that you will not continue the negotiation with that number on the table.”

I suspect that anchoring effects have been used in recent elections as well. I seem to recall reading that all of the Conservatives’ publicity efforts emphasized the possibility of a Conservative majority government. The goal would be to establish this as the anchor. Sadly, this has worked.

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