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Anchoring: Why the Price You Paid Shouldn't Matter (But Feels Like It Does)

Behavioral Finance • Beginner Investing • 6 min

Anchoring bias is when you rely too much on an initial reference point while making a judgment. This can happen even if that reference point has nothing to do with the decision at hand. A classic experiment by Kahneman and Tversky shows this clearly. Participants were shown a spinning wheel that landed on either a low or high number, completely random and unrelated to the actual question. Then, they were asked to…

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