Evidence for opportunity cost neglect in the poor



Previous research shows that many people tend to neglect opportunity costs: They fail to spontaneously consider forgone alternatives outside of a particular choice set. Several researchers have suggested that the poor should be more likely to spontaneously consider opportunity costs because budget constraints lead to a focus on trade-offs. We tested this hypothesis in five high-powered experiments (total N = 2325). The experiments used different products (both material and experiential) with both high and low prices (from $8.50 to $249.99) and different ways of reminding participants of opportunity costs. Both high-income and low-income participants showed a strong decrease in willingness-to-buy when reminded of opportunity costs, implying that both the rich and the poor show opportunity cost neglect. Alternative explanations and implications for studies on poverty and decision making are discussed.
Date made available2017

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