Anchoring and Adjustment
In estimating an unknown quality, we start with some convenient initial value and adjust in particular direction.
- often used when a relevant value is available (e.g., next year’s budget, inflation rate, GPA)
Anchoring & Adjustment Dangers:
1. Insufficient adjustment (anchors weighted too heavily)
2. Underestimating disjunctive events (“or”)
- e.g., nuclear power plant failure.
3. Overestimating conjunctive events (“and”)
- e.g., new project success