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Group-think trivia

The results that come from the herding instinct can sometimes come from active choice to follow a particular group or style, it most often comes from subconscious choice, choices one makes without even being aware of it.

The herding instinct in humans manifests in a number of ways. Three of the largest/most evident manifestations are in:

  • Buying and selling goods and services,
  • Buying and selling financial assets, and
  • In religio-cultural group affiliation and practice.

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Emotional and cognitive biases seem to be the causes of stock market bubbles. But, often, when the phenomenon appears, pundits try to find a rationale, so as not to be against the crowd. Thus, sometimes, people will dismiss concerns about overpriced markets by citing a new economy where the old stock valuation rules may no longer apply. This type of thinking helps to further propagate the bubble whereby everyone is investing with the intent of finding a greater fool.

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The bandwagon effect is the observation that people often do (or believe) things because many other people do (or believe) the same. The effect is often pejoratively referred to as herd instinct. Without examining the merits of the particular thing, people tend to "follow the crowd."

In economics, bandwagon effect is a technical term for an interaction of demand and preference. The bandwagon effect arises when people's preference for a commodity increases as the number of people buying it increases. This interaction potentially disturbs the normal results of the theory of supply and demand, which assumes that price and preference are independent.

Source: Wiki

:) Falkor

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