The impact of cognitive biases on capital investments Empirical evidence regarding the anchoring heuristic

A large body of research shows that cognitive biases—unconscious mental errors caused by simplified information processing strategies—distort decision making in a variety of situations. This article demonstrates that these biases are also highly relevant with regard to decisions in a capital investment context, an area that has not received scientific attention yet. Building on a short introduction of the underlying principles and on brief analogy-based theoretical considerations, the main part describes and analyzes three series of empirical experiments, which clearly show that anchoring-induced cognitive biases systematically distort judgments and decision making in the respective contexts. This is the case for artificially incorporated anchors (first series of experiments) as well as for situation-embedded anchors (second series). The third series of experiments finally shows that the observed bias also persists for professionally experienced people.