A mildly interesting facet of behavioural economics was on display over this weekend when Amazon launched a sale. A food product that I wished to buy had a condition attached: only 3 units per customer (Amazon did not say, please. Manners were never their strong point). That’s artificial scarcity, isn’t it?
Here’s what research on shopping behaviour tells us: when there is a limit (like the one above), shoppers tend to buy more - that’s right, more - than when there isn’t one. That phrase - limit of three - acts as an anchor in our (generally muddled) heads.
Which, of course, brings me to my gurus Dan Kanhemann and Amos Tversky and a story. They once rigged a wheel of fortune. It was marked from 0 to 100, but they had it built so that it would stop only at 10 and 65. They then got students of the Univ of Oregon as participants in this experiment. The wheel would be spun and the students would write down the number on which the wheel stopped, which, of course, was either 10 or 65.
This was followed by 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 at the UN?
You can guess what the students did, right?
Those who saw 10 estimated that 25% of African nations were represented at the UN. Those who saw 65?
Their guess was around 45%.
The anchoring bias is a cognitive bias that causes us to rely heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor instead of seeing it objectively. This can skew our judgement and prevent us from updating our plans or predictions as much as we should.
https://thedecisionlab.com/biases/anchoring-bias
Here’s just one example of this bias ( in taking investment decisions) and why we need to learn about it and our propensity to be influenced by it:
…and a great piece on how to deal with it:
https://hbr.org/2022/08/dont-let-anchoring-bias-weigh-down-your-judgment
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