How an initial value shapes the estimate
When people need to estimate an unknown quantity, they often start with an available number (the anchor) and adjust from it. Even when the anchor is arbitrary or acknowledged as irrelevant, it pulls the final estimate toward it. A study asking participants to estimate the percentage of African nations in the UN spun a random wheel first; the number that appeared (higher or lower) significantly shifted estimates in that direction, despite everyone knowing the wheel was unrelated.
The adjustment from the anchor is typically insufficient. People adjust, but not enough to escape its influence. This persists even when the anchor is obviously wrong, suggesting the mechanism operates partly outside conscious awareness.
Real-world consequences in negotiation and pricing
In salary negotiation, the first number proposed (from either party) becomes a powerful anchor. A high anchor that seems reasonable creates upward pressure on the final agreement even if both parties recognize it might be excessive. Retailers use this deliberately by displaying high original prices to make discounts feel larger.
The anchor effect is so robust that even being told the anchor is random does not eliminate it. This makes it difficult to un-bias your own estimates once exposed to an anchor. Awareness helps, but the most reliable defense is to generate your own estimate independently before seeing any proposed figures.