| Abstract: |
In many business and managerial decisions, accurate estimation of numeric
attributes is crucial, but such estimates are often biased by a previously
considered value—a cognitive bias known as the anchoring effect. This paper
provides an overview of the current state of the literature on the anchoring
effect, with a particular focus on its applications in business settings.
First, we summarize different processes that may underlie the anchoring
effect, which include conversational inferences, insufficient adjustment from
the anchor value, selective accessibility of information compatible with an
anchor, and distortion of a response scale. Second, we review the applications
of anchoring across various business practices, such as predictions,
valuations, negotiations, auctions, promotions, and job performance
evaluations. We provide examples of potential sources of anchors in these
domains and discuss limitations of the existing studies. Next, we describe the
challenge of debiasing anchoring and introduce potential strategies for
reducing the influence of the anchoring effect. Finally, we discuss topics
that have been underexplored and suggest avenues for future research on the
anchoring effect. |