The Mechanism Of Anchoring Effects In Managerial Judgment

Judgment and decision-making are bases of every management function. Correct judgments are the prerequisites of correct decisions and the cornerstones of effective management. Judgment and decision-making have been important topics in management studies. The anchoring effect is a typical phenomenom belonging to heuristics and biases of indivuals’judgments. It was initially defined and summarized by Daniel Kahneman, who is a Nobel Prize winner in economics, and his advisor Amos Tversky in 1974.They put forward that the anchoring effect is a phenomenon in which estimates are biased toward the initial values.In the anchoring effect, judgments will be assimilated to previous encountered irrelevant information thus judgments and decisions will be irrational.The reason why indivuals make anchored judgments is the key question of anchoring effects research. To explain the production of anchoring effecs, previous studies have built up theories and models taking perspectives of adjustment, priming, attitude and judgment scale.These theories, however, remain controversial and lack generality considering different judgment conditions and tasks.In the last decade, the introduction of cognitive psychological and neuroscientific methods to judgment and decision-making research in economics and management has brought new growing points this research field. A bunch of burgeoning disciplines including neuromanagement, neuroeconomics and neuromarketing have growed up fromintersections of management, economics, behavioral science and nature sciences. Studies in these interdisciplines focus on the cognitive and neural bases of individual judgment and decision-making in economics and management settings. They have contributed to better descriptions and understandings of individual behavior, as well as the construction of theoretical models with stronger explanatory power. In research field such as risk decision-making, valuation and social judgment and decision-making, scholars have made great achievements in explaining individual behavior from the aspect of neural activities. On the contrarary, there are few studies in anchoring effects research that have adopted neuroscientific approaches and directly observed the judgment process to justify or modify exsiting theories on the anchoring mechanism.This dissertation focuses on the mechanism of anchoring effects, usingdecision neuroscientific techniques and surveys as research methods and the classical two-step experimental pardigm. In three studies, the cognitive process of the anchoring effect and its neural basis were explored and moderating factors were discussed.In the first study, an electroencephalography (EEG) experiment was conducted. It has investigatedthe cognitive mechanism of anchoring effects in value judgments. The second study aimed at the moderating effect of anchor plausibility in anchoring effects. It used functional magnetic resonance imaging (fMRI) methods to observe the brain coding of different effects brought by anchors with different plausibility. Based on the former two studies, the third study has researched into the possible moderating roles of judgement makers’ Big Five personality traits. In these studies, the cognitive processes and neural correlates underlying anchors’ effects have been revealed, as well as the robustness of anchoring effecs in different levels of the moderators. Based on the results, this study as a whole has built up a model of the anchoring mechanism with the essence of a semantic priming process. The main conclusions are summarized below.(1) The anchoring effect is aprevalent and robust judgment bias. The assimilating effect of the anchor occurs in various judgment domains and task. The existence of the semantic priming effect by the anchor is independent of the type of information needed for judgment, the reliability of the anchor and the personality traits of the judge maker. Robustness is a significant characteristic of the anchoring effect.(2) The essential process of the anchoring effect is a semantic priming process. In an anchored judgment, the processing of the anchor information will activate anchor-consistent information relevant to the judgment. This semantic information, which is accessible when judgment is formed, constitutes the main evidence and primes the judgment, leading to the judgment biasin which the judgment is assimilate toward the anchor value.Besides, the attributes of the anchor, such as anchor plausibility, affect the judge maker’s attitude toward the anchor, thus influencing the depth of processing. As a consequence, the activated semantic information will be different and the extent of the anchoring effect will be altered.(3) The semantic priming mechanism of anchoring effect is reflected by the neural activities during the anchored judgment process. EEG and fMRI data have shown that:During processing of the anchor, the anchor-consistent semantic information related to the judgment question has been activated. This is reflected by the EEG correlates of the anchor-consistent value perception in valuation judgment settings and the brain regions’activations corresponding to the retrieval of anchor-consistent semantic memory and the prior belief updating in factual judgment settings; During the formation of judgment, compared to the anchor-inconsistent information, the accessible anchor-consistent information has been overly embedded in judgment formation. This is represented in the EEG indices of anchor-consistent value construction in value judgment settings and the activation modal of the brain regions underlying the integration of the accessible information in working memories in factual judgment settings.(4) There is no strong correlation between Big Five personality traits and the anchoring effect sizes. Only agreeableness is found to be correlated with the anchoring effect size but the correlation is reversed to what has been found by the two previous studies. Based upon the inconsistency of conclusions in the very few studies on personality traits and anchoring, as well as the cognitive mechanism of anchoring effects proved by this study, it can be implied that the anchoring effect size is significantly related to the factors of the judgment task whereas the moderation of judge makers’ personality traits is not stable.This study has delved into the characteristics and the mechanism of anchoring effects. It has made attempt in research methodology and expansion of research topics in the field of decision neuroscience. The contributions and theoretical innovation are describes as follows:(1) Based on the direct observations on the cognitive processes, this study has modified and integratedexisting anchoring theories and formed an anchoring model on the basis of the semantic priming process. And the applicability of this model in various judgment settings has been verified.(2) This study has taken advantage of neuroscientific experimental approaches to research on managerial judgmental biases. Therefore, it has provided direct cognitive evidencesto clarification of the anchoring effect mechanism and achieved innovation on research methodology.(3) It has expanded the research domains of decision neuroscience and neuromanagement and justified the feasibility and applicability of combining neuroscience and management in judgmental biases research.