People are full of inherent, cognitive biases. That’s part of being human. And over the past 40 years, psychologists have identified over 100 different cognitive biases regularly at play in our lives.[1]
Anchoring is one such cognitive bias that appears in the law, manifesting in litigation, mediation, and negotiation.[2] Anchoring is the idea that people tend to rely heavily on the first number they’re presented, and then use that number as a benchmark to measure all new information against.[3] For example, say you’re buying a shirt. If the first shirt you look at is $1,000 and you then see a second shirt for $300, you’re more likely to think that the second shirt is cheap. This is because the first $1,000 acts as an “anchor”, a reference point, for your brain to lock onto. After you’re anchored, any new value presented to you will shift around that reference point. So even though $300 is a lot of money to spend on a shirt, compared to $1,000, $300 seems like a steal.
Anchoring like this is also present in litigation. In 2018, a study published in the San Francisco Law Review confirmed that anchoring exists in the courtroom.[4] The study presented a group of jurors with a hypothetical criminal case and had the prosecutor propose either a high or a low sentencing recommendation.[5] The results of the study showed that there’s a thin balance to walk when dealing with anchoring in litigation. In the study, when the prosecutor set a high anchor, jury members were 29% more likely to favor the defense’s argument than when presented with a low anchor.[6] These numbers make it seem like setting a high anchor was a bad move for the prosecutor. However, the research also revealed that jurors who were presented with a high anchor rewarded “significantly higher” sentences than those presented with a low anchor.[7] From this data, the study extrapolated that though the prosecutor typically received a higher value reward by setting a high anchor, they also ran the risk of accidently swinging favor to the defense by coming off as unreasonable or vindictive with their high value ask.[8] The study demonstrated that a high anchor can create risky stakes that can be hard to balance.
So, if setting a high anchor can be risky, is the solution to set a low anchor instead?
Not quite. You still face risk when setting a low anchor. The risk in setting a low anchor is that even though your demand may seem more reasonable to a fact-finder, you may draw attention to flaws in your argument, or sell yourself short for what you could have won had you asked for more.[9]
The San Francisco study proposes a solution to mitigate the anchoring cognitive bias with debiasing tactics. When presented with the prosecutor’s anchor, defense counsel could either: ignore, identity, counter, or both identify and counter the anchored proposal.[10] The study found that defense counsel who both identified the prosecutor’s use of an anchor as a manipulative technique and also offered a counter proposal were more likely to get a favorable reward.[11]
In a world where shooting too high can aggravate your audience and even shut down negotiations, and shooting too low can cause the other side to not respond in kind, what does one do? Someone always has to go first . . . right? Resolutn has adopted a system where your proposals can always be “just right.” Resolutn’s innovative digital negotiation system reveals both sides first proposals at the same time, eliminating the risk of one side setting an unfavorable anchor. After that first reveal, Resolutn utilizes a double-blind system where neither side knows if the other has accepted their offer unless a settlement has been reached. With this system, Resolutn counteracts the anchoring bias, maintaining the balance of negotiation power on both sides throughout the entire mediation. Don’t risk anchoring yourself too low or too high. Pick a system that gets the balance just right.
[1] A. Wilke, R. Mata, Heuristics and Biases: A Short History of Cognitive Bias, Encyclopedia of Human Behavior (Second Edition), 2012 (Summary found at https://www.sciencedirect.com/topics/neuroscience/cognitive-bias) (Referencing Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, 185 Science 1124 (1974)).
[2] Christopher T. Stein & Michelle Drouin, Cognitive Bias in the Courtroom: Combating the Anchoring Effect Through Tactical Debiasing, 52 U.S.F. L. Rev. 393 (2018); Steven Schulwof, Let’s Make a Deal: The Psychology of Mediation, Dispute Resolution Committee: American Bar Association (Dec. 17, 2021) https://www.americanbar.org/groups/tort_trial_insurance_practice/committees/dispute-resolution/make-a-deal/.
[3] Helen Lee Bouygues, Don’t Let Anchoring Bias Weigh Down Your Judgment, Harvard Business Review (Aug. 30, 2022) https://hbr.org/2022/08/dont-let-anchoring-bias-weigh-down-your-judgment; ThoughtHub, The Effects of Anchoring Bias on Human Behavior, ThoughtHub (May 23, 2016) https://www.sagu.edu/thoughthub/the-affects-of-anchoring-bias-on-human-behavior/.
[4] Stein & Drouin, supra note 2.
[5] Id.
[6] Stein & Drouin, supra note 2 at 413.
[7] Stein & Drouin, supra note 2 at 414.
[8] Stein & Drouin, supra note 2 at 420.
[9] Katie Shonk, What is Anchoring in Negotiation?, Program on Negotiation: Harvard Law School Daily Blog (Aug. 22, 2022) https://www.pon.harvard.edu/daily/negotiation-skills-daily/what-is-anchoring-in-negotiation/.
[10] Stein & Drouin, supra note 2 409 –10.
[11] Stein & Drouin, supra note 2 at 415, 421.