Most obviously, failure to reach your goal can affect your satisfaction with the overall outcome. Yet there are several potential drawbacks to setting ambitious negotiation goals. Even an unrewarded goal, however, such as running five miles today, boosts performance. Perhaps not surprisingly, performance improves when negotiators are given rewards for reaching a goal, such as a $10,000 bonus for billing 2,000 hours. In a review of goal-setting research, negotiation scholars Deborah Zetik and Alice Stuhlmacher of DePaul University found that when negotiators set specific, challenging goals, they consistently outperform those who set lower or vague goals. In negotiations, the anchoring effect occurs often, but goal setting can affect the end result. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Why? Because they are anchored in the belief that only “crazy” people seek therapy.The anchoring effect is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions.
If you’re “in therapy,” finding it incredibly helpful in alleviating your anxiety and enhancing your self-confidence, you may still decide to keep your therapy a secret from your parents. Her anchor is the amount of housework she does. What’s going on here? Blame it on the anchoring effect. Imagine his surprise then, when his wife berates him for not doing enough. If a husband is doing ten times more housework than his dad ever did, he may feel entitled to a “best husband of the year” award from his wife.But if your parent died at 82 and you’re diagnosed with a fatal disease at 52, boy, will you feel let down. If your same-sex parent died at age 52, living to 82 will feel like a real bonus to you.curfew won’t feel right, even if “all the kids are doing it.” What’s an acceptable curfew for a 16-year-old? If you had to be home by 11 p.m.The anchoring effect influences us in many areas, not just money. We need that anchor number to inform us that we’re getting a bargain. They’ve now reversed their policy and customers are returning. When sales slid bigtime, they got the message. Penney thought it was a smart move to eliminate coupons and instead create “everyday low pricing.” Too bad they weren’t aware of the power of the anchoring effect. Were you a great negotiator or is this one more example of the anchoring effect? You paid $80,000 less for your home than the initial price offering.Stores use it all the time to convince you to buy. And it’s not just a factor between the generations. The anchoring effect is a cognitive bias that influences you to rely too heavily on the first piece of information you receive. Sure, prices have gone up but three times the price? Crazy! No, in your mind, these jeans are way too expensive. You remember, when you were a kid, a great pair of jeans cost no more than $50. Your reference point, however, is quite different.