Contingent behavior in the economic scenario is something that happens when an individual changes his plans or actions according to what the others around him are doing. It is the case wherein the person will do according to what he thinks the others would also be actually doing. He tends to psychologically follow the other.
Simple Examples to Make It Simpler
Let us take a very simple example. If a person is getting ready to go to some occasion like a wedding, then the way he dresses up would signify many things. For example, if the person dresses up in one particular way, he thinks that everyone else would also dress would be an instance of contingent behavior. It could also be the case of how people decide on things like, where they would want to eat. It would be dependent on where others would want to do in their place. One of the best examples would be the case of students who decide on taking leave before a vacation, after getting to know how many other students are also going to do the same. This is the concept of contingency behavior.
Coming To Economics
The same is applicable in the case of economics too. This can be explained with examples in the field of economics. It could be both from the consumer side and also the supplier side. There are certain cases where the supplier decides to produce more, thinking that the product would be on sale or be demanded more. This is just his notion. It could happen on the consumer side too. A customer may try to buy a huge quantity of onions from the market when he thinks that the price now is low and that it may not increase for the next few days and other individuals would follow suit. This way it can happen on both the sides.
The Disasters Possible
But the contingency behavior does not always help. It may turn out to be disastrous too. In case the notion or thought perceived by the supply side is wrong, then the person may end up in either producing too many or too little goods in the market than that was actually necessary or really demanded. In the case of the consumer side, he may end up in buying way too many things or too less that what is actually needed for him.