One of my favorite demonstrations of anchoring was done by a group of MIT economists led by Dan Ariely, as they conducted an auction with their business graduate students. (The study was later repeated with executives at the MIT Executive Education Program with similar results.) The items for sale included everything from a fancy bottle of French wine to a cordless keyboard to a box of chocolate truffles. The auction, however, came with a twist: Before the students could bid, they were asked to write down the last two digits of their social security number. Then, they were supposed to say whether or not they would be willing to pay that numerical amount for each of the products. For instance, if the last two digits of their social security number were 55, then they’d have to decide whether or not the bottle of wine or the cordless keyboard were worth $55. Finally, the students were instructed to write down the maximum amount they were willing to pay for the various items.If people were perfectly rational, then writing down their social security numbers should have no effect on their bids. In other words, a student with a low valued social security number (like 10) should be willing to pay roughly the same price as someone with a high valued number (like 90). But that’s not what happened. Look, for instance, at the bidding for the cordless keyboard. Students with the highest social security numbers (80-99) made an average bid of $56. In contrast, the average bid made by students with the lowest numbers (1-20) was a paltry $16. A similar trend held for every single item. On average, students with higher numbers were willing to spend 300 percent more than those with low numbers.
And Lehrer thinks this phenomenon helps explain the slow reaction to the BP spill.