Anchoring Bias

From Open Risk Manual

Definition

Anchoring bias is the potential bias introduced when making an estimate starting with an initial number (denoted the anchor) and then making adjustments relative to the anchor. The bias comes from the tendency for adjustments to be only incremental.

It is one of the pathologies (Expert Biases) associated with the formation of judgments, others being Availability and Representativeness.[1]

Examples

  1. Using estimates from earlier time points while the forward looking situation may have changed significantly
  2. Using estimates from readily available sources without due consideration for possible differences

References

  1. Kahneman, D. & Tversky, A. (1979). Prospect theory: an analysis of decision making under risk, Econometrica 47

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