The Anchoring Effect. Negotiate Your Salary Like an Expert
- Stefan Sager
- Aug 16
- 8 min read
Updated: Oct 1
You received the job offer. For a moment, there is a rush of excitement and validation, but it vanishes the instant you see the number. The salary is significantly lower than you expected, and your heart sinks. A storm of questions floods your mind: "Do they not value my experience? Is this the most they can do?"
You feel mentally pinned down by their figure. How do you respond without seeming greedy or, even worse, losing the offer entirely?
That feeling of being trapped by an initial number is the result of a cognitive bias known as the Anchoring Effect, and it is one of the single greatest obstacle to getting paid what you are worth. This article will dissect the psychology of why that first offer is so potent and provide a step-by-step framework to help you neutralise a lowball anchor and confidently negotiate the salary you have earned.
I. The Core Idea
Establishing Your Anchor to Negotiate Salary Effectively
The single most important principle in successful salary negotiation is this: you cannot win by simply adjusting from your opponent's starting point. The core idea is to mentally and strategically break free from the influence of their initial offer by establishing a new, more powerful anchor, one that is built on objective data about your true market value.
When a company makes a lowball offer, they are trying to set the entire frame for the negotiation. Responding with a slightly higher number keeps you playing within their frame.
The goal is not to make an incremental move within their range, but to re-anchor the entire conversation to a new range––yours.
This requires a shift in mindset, from being a reactive participant to becoming the proactive architect of the negotiation and building respect in the process.
II. The Everyday Analogy
Understanding Negotiation Frames to Determine True Value
Imagine you are at a flea market and see a vintage watch with no price tag. You like it, but you have no idea what it is worth. The seller says, "For you, $500." Instantly, your entire perception of the watch's value is anchored to $500. You might think it is too high, but your negotiation will now revolve around that number.
You might offer $300, and you might eventually agree on $400, feeling like you got a discount. Now, imagine a different scenario.
Before going to the market, you spend 10 minutes researching that specific model of watch online. You discover its average sale price is between $150 and $200. With this data, you have created your own anchor. When the seller says, "$500," you do not feel anchored; you feel informed. The seller's number is no longer a reference point for value; it is just noise.
You can confidently counter with an offer of $175, backed by evidence, and completely reset the negotiation around a more realistic price point. A lowball salary offer is no different from the seller's inflated first price.
Without your own research, you are at its mercy; with it, you hold the power.
III. The Practical Toolkit
A Step-by-Step Framework to Counter a Low Initial Offer
This framework is your systematic process for dismantling a low anchor and building your case for a higher salary. It is designed to move you from an emotional reaction to a data-driven strategy.
Step 1: Ignore Their Number and Do Your Research
As we said, the moment you receive a low offer, your first action is to consciously set it aside. Do not let it occupy your thoughts. Instead, immediately begin building your own anchor. Use multiple, independent sources to determine your market value:
Online Salary Calculators
Use sites like 🔗Glassdoor, 🔗Levels.fyi, and 🔗Payscale. Input your role, years of experience, skills, and location to get a data-backed range.
Industry Reports
Search for salary surveys from professional organisations in your field.
Informational Interviews
Reach out to trusted peers or mentors in similar roles to discreetly inquire about typical compensation bands. The goal is to arrive at a defensible, specific number, your target salary. This is now your anchor.
To help you come up with a solid estimate, we also developed our own tool that will empower you to set your counter-anchor on a solid foundation.
Step 2: Formulate Your Counter-Anchor and Justification
From the Anchoring Effect Calculator, you now know where you will land, if you are passive––Predicted Anchored Estimate. This allows us now to go into the offensive.
Your counteroffer should not be a round number. A specific figure like "$87,500" implies it is the result of careful calculation, making it a more potent anchor than "$90,000". The visual of the counter-anchor will pull you towards your objective.
Prepare a brief, confident script that justifies this number. This script is crucial because it moves the conversation away from a simple back-and-forth and toward a discussion of your value. It should include:
Your enthusiasm for the role.
A direct statement of your counteroffer.
A summary of the value you bring, citing 2-3 key accomplishments or skills that align with the job description.
A reference to your market research.
Step 3: Deliver Your Counter and Re-Anchor the Negotiation
When you communicate your counter, do not frame it as an adjustment to their offer. Frame it as a new proposal based on your value.
Example Script: "Thank you again for the offer and for your time. I am very excited about the opportunity to join the team. Based on my research into the market rate for this role with my level of expertise, and considering the value I can bring to your key initiatives (mention 1-2 examples), I would be comfortable moving forward at a salary of $87,500."
After stating your counter-anchor, stop talking. Let the silence hang.
This puts the pressure on them to respond to your number, effectively shifting the anchor.
IV. The Deeper Dive
The Universal Bias Affecting Your Salary Negotiation
The Anchoring Effect was first systematically documented by psychologists Amos Tversky and Daniel Kahneman in their seminal 1974 paper, "Judgment under Uncertainty: Heuristics and Biases." They described it as the product of a mental shortcut, the anchoring-and-adjustment heuristic. This model posits that when faced with an uncertain number: the human mind starts with an initial value (the anchor) and then makes insufficient adjustments away from it. Apart from Salary negotiations, we can appreciate this effect also in other fields of life.
In Investing
A stock's recent high price often becomes a powerful psychological anchor. For instance, a stock that was trading at $500 yesterday might fall to $400 today. That recent peak of $500 is now seared into investors' minds as the real value. Many will anchor on that $500 price and view the current $400 as a discount simply because it's cheaper than it was. This happens even if new information suggests the company's fundamental value has also fallen. The lesson is identical for negotiation: just as an investor must ignore the old price to re-evaluate a stock based on its inherent qualities, you must ignore a lowball offer to anchor the conversation to your true, current market value. |
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In Business
During brainstorming sessions, the first idea articulated can inadvertently anchor the group's thinking, constraining creativity. The team may spend the rest of the meeting iterating on that initial concept rather than exploring a wider range of potentially more innovative solutions. This is precisely what happens when a candidate allows a low salary offer to anchor their expectations, preventing them from exploring a negotiation for their true, higher value. |
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By mastering the ability to spot and counteract The Anchoring Effect, you are developing a defence against a universal bias of human judgment.
V. The Advanced Context
Biases, Limitations, and Defining Your Worth
To truly master negotiation, one must understand that The Anchoring Effect does not operate in a vacuum. It is amplified by other cognitive biases and can be countered by applying more sophisticated mental models. The anchor itself is just a number; its power comes from the psychological landscape on which it lands.
The lowball offer gets its emotional punch from 🔗Loss Aversion, our tendency to feel the pain of a loss more acutely than the pleasure of an equivalent gain. The fear of losing the job offer entirely is what makes us hesitant to counter aggressively, giving the initial anchor its teeth. Once the anchor is set, 🔗Confirmation Bias takes over, causing us to subconsciously seek out and favour information that supports the anchor ("Maybe the market is down", "Perhaps their benefits package is really good", etc.).
An effective negotiator must recognise and override these collaborating biases. The most powerful antidote is (🔗TBA) First Principles Thinking. Instead of starting from the anchor they provide, you deconstruct your value from the ground up: your unique skills, your measurable accomplishments, your market data. This allows you to build a case for your worth that is completely independent of their initial frame.
While powerful, The Anchoring Effect is not infallible. Its primary limitation is credibility. If an anchor is so extreme that it is perceived as absurd, it can produce a contrast effect, where it is dismissed entirely and may even damage the credibility of the party presenting it. An offer of $10,000 for a role that typically pays $100,000 will not anchor a negotiation; it will likely end it. Furthermore, the effect is diminished by expertise. A subject matter expert with deep, readily available knowledge is less susceptible to being anchored than a novice. This is why the research in the Practical Toolkit above (III) is so critical, it is the process by which you transform yourself from a novice into an expert on the topic of your own value.
Ultimately, the study of anchoring forces us to ask a fundamental question: "Is your professional value an objective number, or is it a subjective reality created within the context of a negotiation?"
The Anchoring Effect reveals how easily our perception of value can be manipulated, suggesting it is highly subjective. However, the success of the de-anchoring framework shows that you can ground this subjectivity in a foundation of objective data. The act of preparing and defending your own anchor is therefore an act of defining and asserting your own professional worth in a world that will naturally attempt to define it for you on its own terms.
Sources & Further Reading & Disclaimer
Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124-1131.
Wansink, B., Kent, R. J., & Hoch, S. J. (1998). An anchoring and adjustment model of purchase quantity decisions. Journal of Marketing Research, 35(1), 71-81.
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