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Herd Behavior/Effect

Definition 1

Impact on decisions caused by participating in behavior and/or beliefs shared by a large number of others.

Source: Behavioral Science Lab, 2017

Definition 2

This effect is evident when people do what others are doing instead of using their own information or making independent decisions. The idea of herding has a long history in philosophy and crowd psychology. It is particularly relevant in the domain of finance, where it has been discussed in relation to the collective irrationality of investors, including stock market bubbles (Banerjee, 1992). In other areas of decision making, such as politics, science, and popular culture, herd behavior is sometimes referred to as ‘information cascades’ (Bikhchandi et al., 1992). Herding behavior can be increased by various factors, such as fear (e.g. Economou et al., 2018), uncertainty (e.g. Lin, 2018), or a shared identity of decision makers (e.g. Berger et al., 2018).

Source: Behavioral Economics

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