The anchoring and adjustment heuristic is a cognitive bias in decision-making where individuals rely on an initial anchor (a starting point or reference) and make adjustments from that anchor to reach a final estimate or judgment. This heuristic is a mental shortcut that people often use when faced with uncertain or complex situations.

Key features of anchoring and adjustment:

1. **Initial Anchor:**
– Individuals begin with an initial anchor, which can be a specific number, value, or piece of information. This anchor is typically the first piece of information encountered or is provided to them.

2. **Insufficient Adjustment:**
– Instead of making entirely independent judgments, people tend to insufficiently adjust from the initial anchor. The adjustment made from the anchor may not be enough to account for new information or changes in the situation.

3. **Influence on Decision-Making:**
– The initial anchor has a significant influence on subsequent judgments or decisions. Even if the anchor is arbitrary or unrelated to the decision at hand, it can shape the individual’s final estimate.

4. **Perceived Relevance:**
– The perceived relevance of the anchor to the decision-making context can enhance its impact. The more relevant the anchor seems, the stronger its influence on subsequent adjustments.

5. **Examples:**
– **Negotiations:** In a negotiation, the initial offer or counteroffer can serve as an anchor. Subsequent adjustments during the negotiation process may not fully move away from the initial anchor.
– **Pricing:** When pricing a product or service, the initial price presented to consumers can act as an anchor, influencing their perception of what is a reasonable or fair price.
– **Estimation:** In numerical estimation tasks, individuals may be given an initial number as a reference point. Even if the number is random, it can influence their final estimate.

6. **Overcoming Anchoring and Adjustment Bias:**
– Awareness of the anchoring and adjustment bias is a key step in mitigating its effects. Encouraging individuals to critically evaluate the initial anchor and make more independent judgments can help overcome this bias.

7. **Multiple Anchors:**
– Exposure to multiple anchors can further complicate decision-making. Individuals may integrate information from different anchors, leading to a complex pattern of adjustment.

8. **Strategic Use in Communication:**
– Communicators and negotiators can strategically use anchoring to influence perceptions. For example, presenting a higher initial price before a discount can make the discounted price seem more attractive.

The anchoring and adjustment heuristic is one of many cognitive biases that can impact decision-making. Understanding these biases is essential for making more informed and rational decisions. In situations where critical thinking is required, individuals should be encouraged to question and reassess the initial anchor to arrive at more accurate judgments.