The Right Choice-II
Kahneman and Tversky once rigged a wheel of fortune so that it stopped only at numbers 10 and 65. Students in an experiment were asked to rotate the wheel and write down the number on which the wheel stopped. They were then asked two questions. Is the percentage of African nations among UN members larger or smaller than the number you just wrote? What is your best guess of the percentage of African nations in UN? Spin of the wheel gives no clue to the answer of the second question. But students who saw 10 and 65 answered 25% and 45% respectively – clustered around the number they got in the wheel of fortune. Our estimates for an unknown quantity remain close to the first piece of information offered. This is anchoring effect. It has been incontrovertibly proved in many psychology experiments. Salesmen exploit it to boost profits. People bought 7 cans of soup when a nearby sign read, ‘LIMIT OF 12 PER PERSON.’ Sales dropped to half when the sign read, ‘NO LIMIT PER PERSON’. In negoti