On the effect of anchoring on valuations when the anchor is transparently uninformative

Abstract

We test whether anchoring affects people’s elicited valuations for a bottle of wine in individual decision-making and in markets. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects’ Willingness-To-Accept for the bottle before and after the market. Subjects participate in a double auction market either in a small or a large trading group. The variance in subjects’ Willingness-To-Accept shrinks within trading groups. Our evidence supports the idea that markets have the potential to diminish anchoring effects. However, the market is not needed: our anchoring manipulation failed in a large sample. In a concise meta-analysis, we identify the circumstances under which anchoring effects of preferences can be expected.

Anchoring effect in business

“…Some studies suggest possible boundary conditions moderating the effect. The anchoring effect on valuation has been shown to be stronger in hypothetical valuations than in valuations with real-world consequences (Brzozowicz & Krawczyk, 2022;Jung et al, 2016), stronger when the anchor is perceived to be informative than when it is perceived to be uninformative (Ioannidis et al, 2020;Li et al, 2021), and stronger in buying contexts (i.e., willingness-to-pay judgments) than in selling contexts (i.e., willingness-to-accept judgments; Li et al, 2021).…”

Free will without consciousness?

“…For example, while subjects can be biased toward choosing one brand of beverage over others, this occurs only when they are thirsty [118]. Similarly, anchoring effects are found only when the anchor is presented as informative [119,120]. It is accordingly rather difficult to generalize from such special-case results.…”

Anchors on prices of consumer goods only hold when decisions are hypothetical

“…Moreover, they concluded that the strength and robustness of the phenomenon might not be as great as previously believed. Ioannidis et al [ 45 ], in the recent paper questioning the robustness of the anchoring effect on preferences, observed no effect of anchors on the valuation of a bottle of wine. They also performed a concise meta-analysis and demonstrated that the anchoring effect is weaker for familiar goods than for unfamiliar ones and also observed a null result of anchoring in studies with clearly uninformative anchors.…”