232 Understanding Intuitive Decision Making
lower-than-normal prices.^284 Similarly, a low minimum repayment amount printed on a credit card
statement can act as an anchor that infl uences the credit card customer to repay less than they oth-
erwise would, and as a consequence, to pay much more in interest.^285
All types of audience decisions are susceptible to the insuffi cient-adjustment bias. When con-sumers evaluate two or more items bundled together, the value of the most important item anchors
their overall evaluation of the entire bundle.^286 When mock jurors are instructed to consider the
harshest verdict fi rst, the jurors anchor on that verdict and render signifi cantly harsher verdicts.^287
A study of the insuffi cient adjustment bias in investment decisions asked 499 investors to read two
versions of a print ad for a mid-cap mutual fund. Except for the names of the two funds, Euro
Star 100 Fund™ and Euro Star 500 Fund™, both versions of the ad were identical. Both versions
presented the same product information and the same risk-return profi le. Incredibly, investors
anchored on the fi rst value they read—the number in the fund’s name—to determine the fund’s
expected return. On average, investors who read the ad for the Euro Star 100 Fund™ said they
expected a return of 11.8%. Those who read the same ad for the Euro Star 500 Fund™ expected
a 22.6% return.^288
Experts as well as novices make insuffi cient adjustment to the anchor. For example, profes-sional real estate agents make insuffi cient adjustment to the anchor when they predict various
values regarding houses for sale. In one study, agents were allowed to take up to 20 minutes to
inspect a house before they were asked for their predictions. Agents also received one of two
versions of a 10-page handout of the statistics on the house and other houses in the area. The
two versions of the handout were identical except for the asking price—the fi rst version had
an asking price of $119,900; the second had an asking price of $149,900. Those agents who
received the $119,900 asking price on average predicted that the appraisal value of the house
would be $114,204, that the listing price would be $117,745, that the purchase price would
be $111,454, and that the seller would accept an offer no lower than $111,136. On the other
hand, agents who received the asking price of $149,900 on average predicted an appraisal value
of $128,754, a listing price of $130,981, a purchase price of $127,318, and a lowest offer price
of $123,818. Thus, the value of the asking price changed all the average predicted values by
11 to 14%.^289
Even fi nancial experts are not immune to anchoring effects. Auditors from global account-ing fi rms insuffi ciently adjust the anchor when asked to estimate the incidence of fraud.^290
Fund managers anchor on the current value of the Dow Jones Industrial Average when asked
to determine what the value of the Dow would be if dividends were included in its calcula-
tion.^291 Their highest guesses only double or triple the current value even in quarters when the
actual value is more than 70 times greater than the Dow’s current value.^292 When valuing fi rms,
fi nancial analysts tend to anchor on the fi rm’s current market price and then add or subtract
5% of the price instead of calculating the fi rm’s value using the well-accepted discounted cash
fl ow valuation method.^293
The most common anchor that audiences use to judge other people is themselves.^294 Forexample, when asked questions such as, “How does your driving ability compare to that of your
peers?” audiences tend to anchor on their own abilities and then adjust for the skills of their
peers.^295 Audiences also anchor on their fi rst impressions of others. Personal traits mentioned early
in impression formation tasks receive more weight than traits mentioned later. Thus, audiences
tend to rate a person described as “intelligent, slender, and suspicious” more positively than they
rate a person described as “suspicious, slender, and intelligent.”^296 Invariably, when audiences try
to adjust their initial impressions, they adjust too little and infer more about a person’s character
than is warranted.^297