Editing Bandwagon effect (section)

===In economics===
American economist [[Gary Becker]] has argued that the bandwagon effect is powerful enough to flip the [[demand curve]] to be upward sloping. A typical demand curve is downward sloping—as prices rise, [[demand]] falls. However, according to Becker, an upward sloping would imply that even as prices rise, the demand rises.<ref name=":3" />

====Financial markets====
The bandwagon effect comes about in two ways in [[financial market]]s.

First, through [[price bubble]]s: these bubbles often happen in financial markets in which the price for a particularly popular [[Security (finance)|security]] keeps on rising. This occurs when many [[investor]]s line up to buy a security [[bidding]] up the price, which in return attracts more investors. The price can rise beyond a certain point, causing the security to be highly [[Overvaluation|overvalued]].<ref name=":3" />

Second is [[liquidity]] holes: when unexpected news or events occur, [[market participant]]s will typically stop trading activity until the situation becomes clear. This reduces the number of buyers and sellers in the market, causing liquidity to decrease significantly. The lack of liquidity leaves [[price discovery]] distorted and causes massive shifts in [[Asset pricing|asset prices]], which can lead to increased panic, which further increases uncertainty, and the cycle continues.<ref name=":3" />

====Microeconomics====
{{See also|Network effect|Veblen good}}
In [[microeconomics]], bandwagon effects may play out in interactions of demand and preference.<ref name="harvey">{{cite journal |author-link= Harvey Leibenstein |first= Harvey |last= Leibenstein |title= Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand |journal= [[Quarterly Journal of Economics]] |year= 1950 |volume= 64 |issue= 2 |pages= 183–207 |doi= 10.2307/1882692 |jstor= 1882692 }}</ref> The bandwagon effect arises when people's preference for a commodity increases as the number of people buying it increases. Consumers may choose their product based on others' preferences believing that it is the superior product. This selection choice can be a result of directly observing the purchase choice of others or by observing the scarcity of a product compared to its competition as a result of the choice previous consumers have made. This scenario can also be seen in restaurants where the number of customers in a restaurant can persuade potential diners to eat there based on the perception that the food must be better than the competition due to its popularity.<ref name=":0" /> This interaction potentially disturbs the normal results of the theory of [[supply and demand]], which assumes that consumers make buying decisions exclusively based on price and their own personal preference.<ref name=":3" />