Today, professor Easley talked about information cascade, which was really interesting to me because sometimes I just followed my friends or other groups of people even though it was not exactly what I wanted to do. After the class, I was looking for other examples of ‘information cascade’ and I found many related topics to it. Since they were not covered in the class, I want to introduce some of them to you. What I found interesting is: bandwagon effect and groupthink. (there is many other related topics, but I only chose two.)

1) Bandwagon effect: 

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 herding instinct, particularly as applied to adolescents. Without examining the merits of the particular thing, people tend to “follow the crowd”. The bandwagon effect is the reason for the bandwagon fallacy’s success. (from wikipedia http://en.wikipedia.org/wiki/Bandwagon_effect)

How ‘following the crowd’ can be a problem? Well, as some of you learn the theory of supply and demand in microeconomics course - I learned it in ECON 101. The theory assumes consumers buy products based on their prefrences and they decide to buy or not based on the price. However, if people’s decisions depend on others’ decision, the story is different. For example, suppose my value of some book is originally $50 and its price is $55. Since I would be better off not buying it, I do not want to buy it. However, after a few days, I get to know that many people around me have already bought the book and they like it. Moreover, I hear that some people who have not bought yet are going to buy it. Then, I would probably buy it with this price before it increases. If I did not get the information that many people bought it, I would not buy it. The crowd’s behavior affects my decision.

2) Groupthink:

Groupthink is a type of thought exhibited by group members who try to minimize conflict and reach consensus without critically testing, analyzing, and evaluating ideas. Groupthink may cause groups to make hasty, irrational decisions, where individual doubts are set aside, for fear of upsetting the group’s balance. The term is usually used as a derogatory term after the results of a bad decision. (from wikipedia http://en.wikipedia.org/wiki/Groupthink)

I’ve experienced how grouthink can make a serious problem. Two years ago, I had a sight-seeing trip to Mo-hang (in Korea) with some friends of mine. It was our first time to have a trip without parents so that we were so excited. We did not discuss how much money we would need to cover travel expenses; we thought ‘a hundred of thousand won’ would be fine. Even though it was enough money, we bought a lot of alcohols right after we arrived at the inn. Everyone was pretty sure we could go back home because we remembered the price of but tickets from Seoul to Mo-hang. Few of us were thinking about making ‘a nest egg.’ We thought saying any kind of concerns showed one was scared or not brave. Anyway, We used all money except for some for tickets. Next day, the owner of the inn told us that he could not provide a ride to the terminal because the car had a problem. We got nervous because if we missed the bus, which would leave in a couple of hours, we could not go back home and even we did not have money to stay longer or to ride a cab. It was the outcome of our groupthink. Fortunately, we could get a ride from other groups of people in the same inn to the terminal, but we could have not been able to return home safely. It was a really horrible experience for me.

If you read the information on wiki, you can find out that there is many ’serious’ problems caused by groupthink such as Space Shuttle Challenger disaster.

 There is many other related topics, but these two are easiest to understand and analyze for me; it seems that it happens everyday! I believe that to know about bandwagon effects and groupthink could help you not easily give up your own opinion or change your decision. You sometimes need to think one more time before you decide based on other’s decision or behavior. In that way, you could avoid some serious problems.