Anchoring bias in Corporate decision making and its effects on net income

The objective of this study is to analyze the effects of anchoring bias on the cost and net income of the firm or for the corporation and even for a state. In addition, this study also explores the causes of anchoring bias and their effects on faulty decision making and the subsequent and eventual effects on costs and net income. The study is based on theoretical mathematical model where the techniques of partial derivatives have been applied for calculating the contributions of each of the explanatory variables on net income. Since this is a conceptual paper, and therefore, the expected findings of this model suggest that anchoring bias leads to faulty decision making and as a result, the cost for the firm or for the corporation or for the state increases which eventually decreases net income and performance. The study also uncovers that anchoring bias arises because the decision maker trades his or her own small personal gains and ego in exchange for bigger losses for the firm or for the corporation or for the state. Such corrupt practices erode competitiveness of the firm or for the corporation or even for the state and gradually leads to ruins in the long run. Anchoring bias may also arise because of certain political pressure and corrupt practices which often jeopardizes and undermines national interests. This study is one of the latest attempts to evaluate the effects of anchoring bias based faulty decision making on net income and performance. This study will be immensely useful to decision makers, firms, corporations, governments, policy makers, research scholars, students, and academicians across the world.