Anchoring

Dan Airely sent out a couple of videos that demonstrate some of the phenomena studied in behavioral economics as a pre-course activity. The videos showed an experimental setup, then gave a quiz on what you think would happen, then gave the results and an explanation (I think Dan is using the power of taking tests as a learning tool).

The videos showed experiments that I hadn’t seen before, but I was familiar witht the concepts. The first video showed a study that took veterans and measured their pain threshold (when they first started to feel pain) and their pain tolerance (how long they could handle pain). Then doctors were given medical files on all of the participants and asked to categorize them as having had a medical history minor injuries or severe injuries. As expected, those in the “severe injuries” group took about twice as long to register the pain and had a much greater pain tolerance than the “minor injuries” group. Dan attributes this to the way that people with severe injuries associate pain with healing, and have learned that some amount of pain can actually be a good thing.

The second experiment, entitled “coherent arbitrariness,” asked students to take the last two digits of their social security number and assume that was a price in dollars. Then they were given a series of items and asked whether or not they would pay that amount for each item. Once that activity was done, the students were told that they would hold an auction for the items, and asked whether they thought their prior activity would have any affect on their bidding. The students said that the previous activity with their social security number would have no affect, but the outcome showed that it actually made a big difference, with those who had high social security numbers bidding on average $20 more than those with low numbers. This is due to anchoring – a psychological effect that shows that once we see a certain number, we are unconsciously anchored to it. In a way, I can also see the first experiment as a type of anchoring – how our life experience has us predisposed to perceive the world and our place in it in a different way than others – anchoring that is much less arbitrary than in the second expirment.

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