Can anchoring explain biased forecasts? Experimental evidence

Biased forecasts, particularly the inadequate adjustment from current values and excessive clustering, are increasingly explained as resulting from anchoring. However, experiments presented in support of this interpretation lack economic conditions, particularly monetary incentives, feedback for learning effects and an optimal strategy of unbiased predictions. In a novel forecasting experiment, we find monetary incentives to reduce anchoring for simple forecasting tasks only, while higher task complexity and risk increase the bias in spite of incentives for accuracy. Anchors ubiquitously reduce the forecasts’ variance, while individual cognitive abilities and learning effects show debiasing effects only in some conditions. Our results emphasize that biased forecasts and their specific variance can result from anchoring.