The anchoring effect is a cognitive bias where individuals rely heavily on the first piece of information they encounter when making decisions. This initial information serves as a reference point, or "anchor," influencing subsequent judgments and choices. For example, if a person sees a shirt priced at $100, they may perceive a $70 shirt as a good deal, even if the $70 price is still high. This effect can be observed in various contexts, such as negotiations, marketing, and even everyday decisions. In marketing, companies often use high initial prices to create an anchor, making discounts seem more appealing. Understanding the anchoring effect can help individuals make more informed decisions by recognizing the influence of initial information.