Herd behavior describes how individuals in a group can act collectively without centralized direction. The term can refer to the behavior of animals in herds, packs, bird flocks, fish schools and so on, as well as the behavior of humans in demonstrations, riots and general strikes, sporting events, religious gatherings, episodes of mob violence and everyday decision-making, judgement and opinion-forming.
Raafat, Chater and Frith proposed an integrated approach to herding, describing two key issues, the mechanisms of transmission of thoughts or behavior between individuals and the patterns of connections between them. They suggested that bringing together diverse theoretical approaches of herding behavior illuminates the applicability of the concept to many domains, ranging from cognitive neuroscience to economics.
A group of animals fleeing from a predator shows the nature of herd behavior. In 1971, in the oft cited article "Geometry For The Selfish Herd," evolutionary biologist W. D. Hamilton asserted that each individual group member reduces the danger to itself by moving as close as possible to the center of the fleeing group. Thus the herd appears as a unit in moving together, but its function emerges from the uncoordinated behavior of self-serving individuals.
Asymmetric aggregation of animals under panic conditions has been observed in many species, including humans, mice, and ants. Theoretical models have demonstrated symmetry-breaking similar to observations in empirical studies. For example, when panicked individuals are confined to a room with two equal and equidistant exits, a majority will favor one exit while the minority will favor the other.
Characteristics of escape panic include:
- Individuals attempt to move faster than normal.
- Interactions between individuals become physical.
- Exits become arched and clogged.
- Escape is slowed by fallen individuals serving as obstacles.
- Individuals display a tendency towards mass or copied behavior.
- Alternative or less used exits are overlooked.
In human societies
The philosophers Søren Kierkegaard and Friedrich Nietzsche were among the first to criticize what they referred to as "the crowd" (Kierkegaard) and "herd morality" and the "herd instinct" (Nietzsche) in human society. Modern psychological and economic research has identified herd behavior in humans to explain the phenomena of large numbers of people acting in the same way at the same time. The British surgeon Wilfred Trotter popularized the "herd behavior" phrase in his book, Instincts of the Herd in Peace and War (1914). In The Theory of the Leisure Class, Thorstein Veblen explained economic behavior in terms of social influences such as "emulation," where some members of a group mimic other members of higher status. In "The Metropolis and Mental Life" (1903), early sociologist George Simmel referred to the "impulse to sociability in man", and sought to describe "the forms of association by which a mere sum of separate individuals are made into a 'society' ". Other social scientists explored behaviors related to herding, such as Freud (crowd psychology), Carl Jung (collective unconscious), and Gustave Le Bon (the popular mind). Swarm theory observed in non-human societies is a related concept and is being explored as it occurs in human society.
Stock market bubbles
Large stock market trends often begin and end with periods of frenzied buying (bubbles) or selling (crashes). Many observers cite these episodes as clear examples of herding behavior that is irrational and driven by emotion—greed in the bubbles, fear in the crashes. Individual investors join the crowd of others in a rush to get in or out of the market.
Some followers of the technical analysis school of investing see the herding behavior of investors as an example of extreme market sentiment. The academic study of behavioral finance has identified herding in the collective irrationality of investors, particularly the work of Nobel laureates Vernon L. Smith, Amos Tversky, Daniel Kahneman, and Robert Shiller.[a]
Hey and Morone (2004) analyzed a model of herd behavior in a market context. Their work is related to at least two important strands of literature. The first of these strands is that on herd behavior in a non-market context. The seminal references are Banerjee (1992) and Bikhchandani, Hirshleifer and Welch (1992), both of which showed that herd behavior may result from private information not publicly shared. More specifically, both of these papers showed that individuals, acting sequentially on the basis of private information and public knowledge about the behavior of others, may end up choosing the socially undesirable option. The second of the strands of literature motivating this paper is that of information aggregation in market contexts. A very early reference is the classic paper by Grossman and Stiglitz (1976) that showed that uninformed traders in a market context can become informed through the price in such a way that private information is aggregated correctly and efficiently. In this strand of the literature, the most commonly used empirical methodologies to test for herding toward the average, are the works of Christie and Huang (1995) and Chang, Cheng and Khorana (2000). Overall, it was shown that it is possible to observe herd-type behavior in a market context. The results refer to a market with a well-defined fundamental value. Even if herd behavior might only be observed rarely, this has important consequences for a whole range of real markets – most particularly foreign exchange markets.
Crowds that gather on behalf of a grievance can involve herding behavior that turns violent, particularly when confronted by an opposing ethnic or racial group. The Los Angeles riots of 1992, New York Draft Riots and Tulsa Race Riot are notorious in U.S. history. The idea of a "group mind" or "mob behavior" was put forward by the French social psychologists Gabriel Tarde and Gustave Le Bon.
"Benign" herding behaviors may occur frequently in everyday decisions based on learning from the information of others, as when a person on the street decides which of two restaurants to dine in. Suppose that both look appealing, but both are empty because it is early evening; so at random, this person chooses restaurant A. Soon a couple walks down the same street in search of a place to eat. They see that restaurant A has customers while B is empty, and choose A on the assumption that having customers makes it the better choice. Because other passersby do the same thing into the evening, restaurant A does more business that night than B. This phenomenon is also referred as an information cascade.
- Bandwagon effect
- Collective behavior
- Collective consciousness
- Collective effervescence
- Collective intelligence
- Crowd psychology
- Group behavior
- Herd mentality
- Hive mind
- Informational cascade
- Mass hysteria
- Mean world syndrome
- Mob rule
- Moral panic
- Social proof
- Spontaneous order
- Swarm intelligence
- Team player
- The 2009 Birmingham, Millennium Point stampede
- Symmetry breaking of escaping ants
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- In Focus article (8 June 2012), "WNFM: A Focus on Fundamentals One Year After Fukushima", Reproduced article from Nuclear Market Review, TradeTech, retrieved 4 March 2013 There are several reproduced In Focus articles on this page. The relevant one is near the bottom, under the title in this reference
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