Economics Game Theory In Behavioral Economics Questions
Herding behavior refers to the tendency of individuals to follow the actions and decisions of others, rather than making independent choices. In game theory, herding behavior can have a significant impact on individual choices. When individuals observe others making certain choices, they may feel compelled to follow suit, even if it goes against their own preferences or beliefs. This can lead to a cascade effect, where a large number of individuals end up making the same choice, regardless of its rationality or potential consequences. Herding behavior can result in suboptimal outcomes, as individuals may ignore their own information or analysis in favor of conforming to the actions of others.