Herd behavior

Herd behavior 2018-02-09T11:39:42+00:00

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, Hirschleifer, & Welch,  1992).


Banerjee, A. (1992). A simple model of herd behavior. Quarterly Journal of Economics, 107, 797-817.

Bikhchandi, S., Hirschleifer, D., & Welch, I. (1992). A theory of fads, fashion, custom and cultural change as informational cascades. Journal of Political Economy, 100, 992-1026.


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