Anchoring and Adjustment Heuristic

Definition

Life requires people to estimate uncertain quantities. How long will it take to complete a term paper? How high will mortgage rates be in five years? What is the probability of a soldier dying in a military intervention overseas? There are many ways to try to answer such questions. One of the most common is to start with a value that seems to be in the right ballpark and then adjust it until a satisfactory estimate is obtained. “My last paper took a week to write, but this one is more demanding so maybe two weeks is a good guess.” “Mortgage rates are low by historic levels, so perhaps they'll be a couple of points higher in five years.” “The fatality rate in the last ...