A student who works at a record store and plays in a rock band thinks for a minute about his own music-purchasing habits, and then makes a quick guess about the number of other students who buy more than 30 CDs a year. He grossly overestimates. He has probably applied the

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Pugsley

Business

14 July, 12:47

A student who works at a record store and plays in a rock band thinks for a minute about his own music-purchasing habits, and then makes a quick guess about the number of other students who buy more than 30 CDs a year. He grossly overestimates. He has probably applied the

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Reid · Answer 1

The correct answer is anchoring and adjustment heuristic.

Explanation:

It is a cognitive bias that describes the common human tendency to rely too much on the first piece of information that is offered when making decisions: the "anchor." It is also known as the "focus effect." During decision making, anchoring occurs when people use an initial piece of information to make subsequent judgments. Once the anchor is fixed, the rest of the information is adjusted around the anchor position incurring a bias.

For example, the initial price offered by a used car sets the standard for the rest of the negotiations, so prices lower than the initial price seem more reasonable even if they are still higher than what the car really is worth. Similarly if you ask about the population of Ukraine: "Is it greater than or less than one hundred million people?", The answers will vary, but in general they will be somewhat less than that figure. However, if the question were: "Is the population of Ukraine greater or less than twenty million people?", The answers will vary, but the average number of responses will not change much compared to the initial anchor. That is, it starts from the "anchor value" and an adjustment is made ... which is usually in the right direction but of insufficient magnitude.