Anchoring bias in business decisions and negotiations
The essentials in 30 seconds
- Anchoring bias in business decisions and negotiations is the pull of the first number on later estimates.
- In the 1974 experiment of Tversky and Kahneman, a wheel stopped on 10 led to an average guess of 25 percent, and 65 to 45 percent.
- In the illustrative supplier deal, an opening of 1,000 pulls the settlement to 900 against an estimate of 780.
- Preparing a target, a walk-away and an alternative reduces the pull.
- The EQOS Asia engine scores a decision on 9 structural dimensions (EQOS Asia method page, as of October 2026).
Anchoring bias means that the first number on the table pulls every later estimate toward it. In a negotiation the pull reaches the final price. This page, part of the guide to cognitive biases, shows how an opening offer moves a settlement in an illustrative supplier deal and gives 4 routines to resist, use or reset an anchor. All figures are illustrative as of October 2026.
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What is anchoring bias, and what did Tversky and Kahneman measure?
Anchoring bias is the tendency to let an initial number shape later estimates, even when the number has no link to the question. In 1974 Tversky and Kahneman had participants watch a roulette wheel that stopped on 10 or 65 and then give a percentage estimate. Those who saw 10 guessed 25 percent on average, and those who saw 65 guessed 45 percent.
The wheel was random, which shows that an anchor needs no logic to work. Business anchors are stronger because they arrive with a story: a list price, last year’s budget, a competitor’s offer. The first step in resisting any of them is to notice that a number has been placed on the table before the analysis started.
How does an opening offer pull the final price of a negotiation?
Take an illustrative supplier deal in Bangkok for 5,000 units. The buyer’s private estimate of a fair price is 780 per unit (US$). The supplier opens at 1,000. The buyer, hearing a high number first, counters at 850 and settles at 900 after two rounds, 120 above the private estimate.
The pull is 120 per unit, or about 15 percent of the estimate, which across 5,000 units equals 600,000. Nobody lied and nobody made an arithmetic error. The opening number simply moved the middle of the conversation upward, and each concession was measured from there.
How do you prepare numbers before a negotiation to resist an anchor?
Prepare 3 numbers before the first meeting: a target, a walk-away and the best alternative. In the illustration the buyer’s target is 760, the walk-away is 850, and a second supplier offers 830. The numbers come from costs, quotes and market data and are written down with their sources.
With the numbers on paper, an opening of 1,000 reads as a gap of 150 above the walk-away and serves as information about the supplier’s ambition. The buyer can say that the offer sits outside the working range and ask for its basis. A prepared alternative also turns the conversation from price alone to total value.
Should you make the first offer in a negotiation decision?
Making the first offer lets you place the anchor yourself. In the illustration the buyer opens at 720, 40 below the target of 760, with 2 reasons: a volume of 5,000 units and a payment term of 30 days. The offer sits close to the buyer’s range and is easy to defend.
The supplier counters at 900 and the sides settle at 780, 20 above the target and 120 below the earlier settlement of 900. The saving is 120 per unit, or 600,000 across 5,000 units. Opening first suits a buyer who holds good information about the market. When information is thin, listen first and prepare the numbers.
How do you re-anchor a negotiation when the other side speaks first?
When the other side opens first, restore the range before replying. Ask for the basis of the number, name an independent benchmark and propose a range such as 740 to 820. A range shifts the conversation away from a single point and places the supplier’s 1,000 outside the discussion zone.
Pause before the counter. A break of an hour or a night lets the team recompute against the prepared numbers. Restate the whole package as well: volume, term, quality and delivery. Each added variable gives both sides more room to find value than a bare price contest does.
How does anchoring distort an internal valuation decision?
Anchors also arrive inside the company. A seller asks 12 times earnings for a target. The board then debates between 10 and 12, so 12 sets the frame. Three independent estimates prepared earlier, at 8, 9 and 10 times earnings, would have put the discussion at a different centre.
Collect independent estimates before any asking price is shared, average them and publish the range. Compare the asking price with the range as the first agenda item. A gap between 12 and a range of 8 to 10 becomes a clear question for the board: what extra value does the seller’s price assume?
How does the EQOS Asia decision engine give a negotiation a baseline?
The EQOS Asia method scores a decision on 9 structural dimensions from structured interviews and documents, and the Audit pillar returns a φ(S) score between 0 and 1 (EQOS Asia method page, as of October 2026). A team can compute that reading before it meets a counterparty, so the first number on the table meets a prepared baseline.
The pricing lens of the Codex, written Π, measures the ability to set prices without losing customers (EQOS Asia method page, as of October 2026). A reader can try a first score in the simulator, and the 30-minute pre-diagnostic, scheduled in Singapore time (SGT), applies the equation to a real negotiation.
See also in this guide
Frequently asked questions
What is anchoring bias?
Anchoring bias is the tendency to let an initial number shape later estimates, even when the number has no link to the question. In 1974 Tversky and Kahneman showed it with a random wheel: a stop at 10 led to an average guess of 25 percent, and a stop at 65 led to 45 percent.
How do you counter an anchor in a negotiation?
Prepare a target, a walk-away and the best alternative before the first meeting, ask the other side for the basis of its number and answer with a range backed by an independent benchmark. A pause before the counter-offer lets the team recompute against the prepared numbers.
Should the buyer or the seller make the first offer?
The party with the better information about the market can open first and place the anchor with 2 reasons. In the illustrative deal, an opening of 720 led to a settlement of 780 instead of 900. When information is thin, preparing the numbers and listening first is the safer sequence.
How can the EQOS Asia pre-diagnostic help with a negotiation?
A free 30-minute pre-diagnostic, scheduled in Singapore time (SGT) and held under NDA, applies the EQOS Asia equation to a real negotiation or valuation (EQOS Asia contact page, as of October 2026). It gives the team a computed baseline to bring to the table.
Test your knowledge
1. Which numbers did the wheel stop on in the 1974 experiment?
- 10 and 65
- 25 and 45
- 5 and 50
Show the answer
10 and 65.
2. What is the buyer’s private estimate in the supplier deal?
- 760
- 780
- 850
Show the answer
780.
3. What is the buyer’s walk-away number?
- 830
- 1,000
- 850
Show the answer
850.
4. At what price do the sides settle when the buyer opens at 720?
- 780
- 900
- 720
Show the answer
780.
5. How much is saved across 5,000 units by opening first?
- 120,000
- 600,000
- 780,000
Show the answer
600,000.
About the author
Stéphane Jambu
President, EQOS Forecast Asia
Stéphane Jambu leads EQOS Forecast Asia and works as a consultant in e-commerce, search visibility, and AI. LinkedIn profile
Sources: EQOS Asia method page (eqos-asia.com/method.html), simulator page (eqos-asia.com/simulator.html), and contact page (eqos-asia.com/contact.html), and en.wikipedia.org/wiki/Anchoring_effect, consulted on 22 October 2026. Page updated on 22 October 2026.