Herding Behavior
Market bubbles, panic selling, and viral misinformation spread through herding - people following others without independent assessment.
Once an information cascade starts, individuals stop assessing evidence independently - they rely on social information (others are fleeing, so I should flee). This creates herding: coordinated behavior based on social cues rather than individual assessment.
Herding is adaptive when individuals have low private information (you didn't see the predator but many others are fleeing - trust the crowd). But herding is maladaptive when cascades are triggered by false alarms or manipulative signals. Receivers trade individual assessment for rapid coordination, gaining speed at the cost of occasional false cascades.
Business Application of Herding Behavior
Market bubbles, panic selling, and viral misinformation spread through herding - people following others without independent assessment. Organizations must balance rapid coordinated response (beneficial herding) against groupthink and false cascades (harmful herding).