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A stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation. Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to groupthink and herd behavior .
A crowd changes its level of emotional intensity over time, and therefore, can be classed in any one of the four types. Generally, researchers in crowd psychology have focused on the negative aspects of crowds, [11] but not all crowds are volatile or negative in nature. For example, in the beginning of the socialist movement crowds were asked ...
Herd mentality is the tendency for people’s behavior or beliefs to conform to those of the group they belong to. The concept of herd mentality has been studied and analyzed from different perspectives, including biology, psychology and sociology.
To the crowd and the public Blumer adds a third form of collective behavior, the mass. It differs from both the crowd and the public in that it is defined not by a form of interaction but by the efforts of those who use the mass media to address an audience. The first mass medium was printing.
The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, published in 2004, is a book written by James Surowiecki about the aggregation of information in groups, resulting in decisions that, he argues, are often better than could have been made by any single member of the group.
In psychology, a social trap is a conflict of interest or perverse incentive where individuals or a group of people act to obtain short-term individual gains, which in the long run leads to a loss for the group as a whole. [1]
Motivation crowding theory is the theory from psychology and microeconomics suggesting that providing extrinsic incentives for certain kinds of behavior—such as promising monetary rewards for accomplishing some task—can sometimes undermine intrinsic motivation for performing that behavior.
In an economics context, diffusion of responsibility can be observed in groups when a leader assigns tasks to individuals. To promote the concept of fairness, the leader will generally assign an equal amount of work to individuals within the group. This is in part due to the idea that people in general want to seem fair and kind. [15]