How Anchoring Effect Explains Individual Behaviour and Economic Outcome

Research Article
Open access

How Anchoring Effect Explains Individual Behaviour and Economic Outcome

Shaoqi Luo 1*
  • 1 University of Nottingham    
  • *corresponding author hmysl9@nottingham.edu.cn
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/22/20230288
AEMPS Vol.22
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-87-4
ISBN (Online): 978-1-915371-88-1

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

Luo,S. (2023). How Anchoring Effect Explains Individual Behaviour and Economic Outcome. Advances in Economics, Management and Political Sciences,22,66-70.
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References

[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.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-87-4(Print) / 978-1-915371-88-1(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.22
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[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.

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