Download pdf
How Anchoring Effect Explains Individual Behaviour and Economic Outcome
- 1 University of Nottingham
* Author to whom correspondence should be addressed.
Abstract
The exploration of anchoring effect has developed for a long time in history, and there are many outstanding works. This paper briefly introduces the possible influence of anchoring bias on individual behavior and economic outcomes in behavioral economics, and summarizes the definition, background and significance of this bias. It also uses three applications, including the estimation in the stock market, the retrospective data in the empirical research and the marketing and advertising to prove that the anchoring effect could be important and common both in daily life and economic activities as thinking and decision-making will be affected by this effect. This article finds that the anchoring effect does exist in many economic activities and affects judgments and decisions. This kind of influence sometimes leads to misjudgment and brings negative significance, but sometimes it can be used by people.
Keywords
anchoring bias, behavioral economics, economic activities, judgments, decisions
[1]. Kahneman (2011) ‘Thinking, fast and slow’.
[2]. Wei, L. (2018) ‘A literature review of anchoring effects’, Science and wealth, 2018, Vol.2 https://m.fx361.com/news/2018/0316/3246519.html.
[3]. Mussweiler, T., & Strack, F. (2001). The semantics of anchoring. Organizational behavior and human decision processes, 86(2), 234-255. https://www.sciencedirect.com/science/article/pii/S0749597801929541.
[4]. Mussweiler, T., Strack, F., and Pfeiffer, T. (2000) ‘Overcoming the inevitable anchoring effect: Considering the opposite compensates for selective accessibility’, Personality and Social Psychology Bulletin, 26(9), 1142-1150. https://journals.sagepub.com/doi/abs/10.1177/01461672002611010?journalCode=pspc.
[5]. Cen, L. , Hilary, G. and Wei, J. (2013) ‘The Role of Anchoring Bias in the Equity Market: Evidence from Analysts' Earnings Forecasts and Stock Returns’, The Journal of Financial and Quantitative Analysis , FEBRUARY 2013, Vol. 48, No. 1 (FEBRUARY 2013), pp. 47-76 https://www.jstor.org/stable/43303792.
[6]. Godlonton, S. , Hernandez, M. and Murphy, M. (2017) ‘Anchoring Bias in Recall Data: Evidence from Central America’, https://doi.org/10.1093/ajae/aax080.
[7]. Maniadis, Z. (2014) ‘One Swallow Doesn't Make a Summer: New Evidence on Anchoring Effects’, AMERICAN ECONOMIC REVIEW, VOL. 104, NO. 1, JANUARY 2014 (pp. 277-90) https://www.aeaweb.org/articles?id=10.1257/aer.104.1.277.
[8]. Bunčić, S. , Krstić, J. and Stanković, M. (2021) ‘Cognitive biases in marketing communication: Influence of Anchoring and Message Framing on Consumers’ Perception and Willingness to Purchase’. https://www.researchgate.net/publication/357390071_Cognitive_biases_in_marketing_communication_Influence_of_anchoring_and_message_framing_on_consumers'_perception_and_willingness_to_purchase.
Cite this article
Luo,S. (2023). How Anchoring Effect Explains Individual Behaviour and Economic Outcome. Advances in Economics, Management and Political Sciences,22,66-70.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).