Suppose Chelsea reads two news articles about future house prices. The first article predicts that house prices will fall next month, and the second predicts that house prices will rise next month. Valerie reads the same two articles, but she first reads the one that predicts that house prices will rise, and then reads the one that predicts that house prices will fall. If Chelsea and Valerie know very little about future house prices, and each uses anchoring and adjustment to form her assessment, then, all else equal, which of them is more likely to think that house prices will rise next month?
A)Chelsea
B)Valerie
C)They are both equally likely to think that house prices will rise
D)They will both think that house prices will stay the same

Question

Quizplus · Accepted Answer

Anchoring and adjustment is an estimation technique that begins with an initial approximation (the anchor), which is then modified in accordance with additional available information (the adjustment). When people use anchoring and adjustment to estimate something, they typically place too much importance on the anchor, and make subsequent adjustments that are too small. In this case, the prediction made in the first article each woman reads is likely to serve as an anchor, so that Valerie will be more likely than Chelsea to think that house prices will rise.

Suppose Chelsea Reads Two News Articles About Future House Prices