In economics, herd behavior refers to a phenomenon in which people follow the lead of other when making financial decisions. As a result, many people make the same choice at the same time. Economists think that herd behavior is driven by the confidence people place on the decisions made by a group. This theory is supported by several pieces of evidence.
One example that shows that people have more faith in group decisions can be seen in the case of a book called The Discipline of Market Leaders. The book didn't receive good reviews, in fact, it was widely criticized as being terrible. Yet, it was named a bestseller by a popular newspaper. It achieved that status because the authors themselves bought 50,000 copies when it was first released in stores. They did it in order to make the book popular. Following the book's placement on the bestseller list, many more copies were sold. In fact, the book remained a bestseller for some time after wards. Its continued success show that people were willing to buy a mediocre book based on the assumption that many others had already bought and enjoyed it.
Research also shows that people herd more often when they know the decisions of others. In one study, scientists monitored the behavior of investors over three years. They found that investors that had stocks in large companies herded often. Economists link the herding behavior to the availability of information about large companies. Such information is available so widely that many people would rather make a decision based on that information rather than their own knowledge. As a result, they often make the same decisions as these large companies.