What is the 'Bandwagon Effect'

The bandwagon effect is a psychological phenomenon in which people do something primarily because other people are doing it, regardless of their own beliefs, which they may ignore or override. The bandwagon effect has wide implications, but is commonly seen in politics and consumer behavior. This phenomenon can also be seen during bull markets and the growth of asset bubbles.

BREAKING DOWN 'Bandwagon Effect'

This tendency of people to align their beliefs and behaviors with those of a group is also called a herd mentality. For example, people might buy a new electronic item because of its popularity, regardless of whether they need it, can afford it or even really want it. In politics, the bandwagon effect might cause citizens to vote for the person who appears to have more popular support because they want to belong to the majority.

Bandwagon Effect Origin

The term "bandwagon" refers to a wagon that carries a band through a parade. During the 19th century, an entertainer named Dan Rice traveled the country campaigning for President Zachary Taylor. Rice's bandwagon was the centerpiece of his campaign events, and he encouraged those in the crowd to "jump on the bandwagon" and support Taylor.

The campaign was successful, with Taylor elected president, prompting future politicians to employ bandwagons in their campaign efforts in hopes of similar results. By the early 20th century, bandwagons were commonplace in political campaigns, and "jump on the bandwagon" had become a derogatory term used to describe the social phenomenon of wanting to be part of the majority even when it means going against one's principles or beliefs.

Bandwagon Effect at Work

The bandwagon effect permeates many aspects of life, from stock markets to clothing trends to sports fandom. During the dotcom bubble of the late 1990s, dozens of tech startups emerged that had no viable business plans, no products or services ready to bring to market, and in many cases nothing more than a name (usually something tech-sounding with "com" or "net" as a suffix). Despite lacking in vision and scope, these companies attracted millions of investment dollars in large part due to the bandwagon effect.

The bandwagon effect happens frequently among fans when sports teams start winning. The Miami Heat of the NBA averaged 17,730 fans at home games in 2009-2010, the season immediately prior to LeBron James' announcement he was leaving Cleveland to play for Miami. After James arrived in Miami, he promptly led the Heat to four consecutive NBA Finals appearances, winning two of them. During those seasons, the Heat's home attendance averaged between 19,700 and 20,000 fans.

RELATED TERMS
  1. Behavioral Economics

    Behavioral Economics is the study of psychology as it relates ...
  2. Marketing Campaign

    Marketing campaigns promote a product through different media, ...
  3. Miami Stock Exchange

    The Miami Stock Exchange offers a full range of processing and ...
  4. Calendar Effect

    The calendar effect is a collection of theories asserting certain ...
  5. Network Effect

    The network effect is a phenomenon whereby a good or service ...
  6. September Effect

    The September effect refers to historically weak stock market ...
Related Articles
  1. Insights

    Money And Politics

    Learn about the progression of events and legislation that shaped and influenced today's political environment.
  2. Trading

    3 Small-Cap Blockchain Plays

    Small-cap laggards are changing corporate identities and jumping on the blockchain bandwagon, triggering strong momentum rallies.
  3. Investing

    LeBron James' Career Earnings Surpass $1B

    The best player in the league has used his position to ink major endorsement deals.
  4. Personal Finance

    Traveling to Miami on a Budget

    Learn how to have the time of your life in Miami, one of the favorite playgrounds of the wealthy, even if you are not wealthy yourself.
  5. Managing Wealth

    Donald Trump’s Right That the Game Is Rigged – for Him to Make Money by Running

    Here’s how The Donald games election law to spin glitz into cash.
  6. Investing

    Behavioral Bias: Cognitive Versus Emotional Bias in Investing

    We all have biases. The key to better investing is to identify those biases and create rules to minimize their effect on investing decisions.
  7. Trading

    Market Cycles: The Key to Maximum Returns

    Understand the various phases of the market cycle, to avoid bubbles and make the best investments.
  8. Trading

    Understanding Investor Behavior

    Discover how some human tendencies can play out in the market, posing the question: are we really rational?
  9. Small Business

    Athletes Who Make More From Endorsements Than Sports

    When an athlete becomes a one-person brand, he or she can make more from endorsements than the sport he or she is famous for playing.
  10. Insights

    Clinton Defeated Despite Outspending Trump

    For those looking for answers about what happened this election, the details of campaign donations may offer some clues.
RELATED FAQS
  1. What's the difference between the income effect and the substitution effect?

    Learn more about the income effect and substitution effect in economics. Find out how these two principles impact consumer ... Read Answer >>
  2. What is the effective interest method of amortization?

    Find out more about the rationale and advantages of the effective interest rate method and how it is used to amortize a discounted ... Read Answer >>
Hot Definitions
  1. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  2. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  3. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  4. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  5. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center