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'

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. 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.

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 frequently happens 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 before 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. Miami Stock Exchange

    The Miami Stock Exchange offers a full range of processing and ...
  2. Behavioral Finance

    Behavioral finance is a field of finance that proposes psychology-based ...
  3. Calendar Effect

    The calendar effect is a collection of theories asserting certain ...
  4. The Wealth Effect

    The wealth effect in behavioral finance suggests that investors ...
  5. September Effect

    The September effect refers to historically weak stock market ...
  6. SEC Form 13F

    SEC Form 13F, a quarterly report filed by institutional investment ...
Related Articles
  1. Trading

    An Introduction to Consensus Indicators

    Learn how the herd is almost always wrong, or at least late in jumping on the bandwagon.
  2. Insights

    Money And Politics

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

    The NBA’s Business Model

    Drawing interest domestically and abroad, the NBA has seen its popularity and revenue streams increase rapidly over the past few years.
  4. Insights

    The Taylor Rule: An Economic Model for Monetary Policy

    Learn about the The Taylor Rule, an interest rate forecasting model that's helped central banks around the world adjust their rates to balance out inflation.
  5. 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.
  6. Insights

    Recession-Proof Sports Leagues

    Even in the hardest of times, these leagues are certain to turn a profit.
  7. Insights

    Donald Trump’s Potemkin Campaign

    Trump doesn’t consult campaign roadmaps. It is not even clear he knows how to read one. Elevating Steve Bannon is just one more piece of evidence.
  8. Insights

    Heartbreaking Pro Sports Team Relocations

    A look at four sports teams that have gone through chaotic divorces with the cities that loved them.
  9. Investing

    Why Disney and Comcast Should Fear Netflix

    Media consolidation could be the next wave of the future as content wars heat up.
RELATED FAQS
  1. How do you calculate the income effect distinctly from the price effect?

    Learn more about how the income and substitution effects operate in economics and how to separate either of these while calculating ... Read Answer >>
  2. What effect does the income effect have on my business?

    Learn if you should open or modify your existing small business based on the income effect. Learn if it would positively ... Read Answer >>
  3. What lessons did the tech bubble crash give to investors in the Internet sector?

    Learn how investors contributed to the dot-com bust and how Internet services and investing has changed since the market ... Read Answer >>
Trading Center