Most obviously, failure to reach your goal can affect your satisfaction with the overall outcome. Yet there are several potential drawbacks to setting ambitious negotiation goals. Even an unrewarded goal, however, such as running five miles today, boosts performance. Perhaps not surprisingly, performance improves when negotiators are given rewards for reaching a goal, such as a $10,000 bonus for billing 2,000 hours. In a review of goal-setting research, negotiation scholars Deborah Zetik and Alice Stuhlmacher of DePaul University found that when negotiators set specific, challenging goals, they consistently outperform those who set lower or vague goals. In negotiations, the anchoring effect occurs often, but goal setting can affect the end result. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Management Review Quarterly.The anchoring effect is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.
#THE ANCHORING TRAP HOW TO#
How to measure the status quo bias? A review of current literature. The status quo bias has been studied in a range of fields, including Business and Economics, Information Systems, Psychology and Medicine, Politics and Law, as well as Energy and Sustainability (Godefroid et al., 2022).ĭean, M., Kibris, O., & Masatlioglu, Y. For example, status quo bias is more likely when there is choice overload (Dean et al., 2017) or high uncertainty and deliberation costs (Nebel, 2015). While status quo bias is frequently considered to be irrational, sticking to choices that worked in the past is often a safe and less difficult decision due to informational and cognitive limitations (see bounded rationality). The latter is based on Kahneman and Tversky’s observation that people feel greater regret for bad outcomes that result from new actions taken than for bad consequences that are the consequence of inaction (Kahneman & Tversky, 1982). Samuelson and Zeckhauser note that status quo bias is consistent with loss aversion, and that it could be psychologically explained by previously made commitments, sunk cost thinking, cognitive dissonance, a need to feel in control, and regret avoidance. This suggests that a lack of switching could not be explained by unchanging preferences. One particular plan with significantly more favorable premiums and deductibles had a growing market share among new employees, but a significantly lower share among older enrollees.
This may happen even when only small transition costs are involved and the importance of the decision is great.įield data from university health plan enrollments, for example, show a large disparity in health plan choices between new and existing enrollees. Status quo bias is evident when people prefer things to stay the same by doing nothing (see also inertia) or by sticking with a decision made previously (Samuelson, & Zeckhauser, 1988).
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