Anchoring and Adjustment
Anchoring is a cognitive bias where decisions hinge on pre-existing notions or data, true or not, acting as a mental starting point. People often adjust from this anchor, even when it’s flawed. For instance, an investor anchored to a specific financial model might apply it in unsuitable scenarios, leading to poor outcomes. This bias skews judgment by over-relying on initial information, like a strategy or price, rather than adapting to new evidence. It’s a common pitfall in decision-making, especially in finance, where flexibility is key.
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