Anchoring and adjustment is a cognitive heuristic where a person starts off with an initial premise or idea and adjusts their beliefs of that idea based upon it. It is best understood by understanding the effects of relying on an initial presumption or opinion which influences subsequent decisions. It has been used in pricing, negotiations and decision-making, but can result in erroneous judgments if the primary anchor is significantly deviant from the true value.

Awareness of the meaning of anchors and the corresponding adjustment process is prudent in many aspects of life, and in many contexts. The effects of an anchor can be modified by a range of factors like incentives, the level of thought given to a range of ideas, expertise, experience, individual personality and moods.

Anchoring and adjustment can be applied to sales in a variety of ways to influence prices or negotiation outcomes. Using anchoring to advantage requires setting an initial anchor that is favorable to one’s position. It is important to be aware of your own initial anchor before attempting to negotiate so that you may have the best chance of successfully influencing the outcome.

For instance, if you are negotiating a salary, setting a high anchor could positively affect the outcome. However, keep in mind that you should be reasonable with your anchor and avoid coming on too strong in your attempts to get a better outcome.

In conclusion, anchoring and adjustment is a cognitive tool which affects decision-making. When used strategically, it can be advantageous in negotiations. Conversely, in situations where the anchor is significantly deviant from the true value, erroneous judgments may be made. Awareness of the nature of anchoring and adjustment, along with taking into account various factors, is important in order to come to reasonable conclusions.