Evidence for opportunity cost neglect in the poor

A. Plantinga, J.M.T. Krijnen, M. Zeelenberg, S.M. Breugelmans

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Abstract

People often neglect opportunity costs: They do not fully take into account forgone alternatives outside of a particular choice set. Several scholars have suggested that poor people should be more likely to spontaneously consider opportunity costs, because budget constraints should lead to an increased focus on trade-offs. We did not find support for 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 methods of reminding participants of opportunity costs. High-income and low-income participants showed an equally strong decrease in willingness to buy when reminded of opportunity costs, implying that both the rich and the poor neglect opportunity costs.
key words: opportunity costs; poverty; scarcity; judgment and decision making
Original languageEnglish
Pages (from-to)65-73
JournalJournal of Behavioral Decision Making
Volume31
Issue number1
DOIs
Publication statusPublished - 2018

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neglect
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low income
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Keywords

  • opportunity costs
  • poverty
  • scarcity
  • judgment and decision making
  • DECISION-MAKING
  • MECHANICAL TURK
  • POVERTY
  • CHOICE
  • MONEY
  • CONSEQUENCES
  • PREFERENCE
  • PEOPLE
  • TIME

Cite this

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abstract = "People often neglect opportunity costs: They do not fully take into account forgone alternatives outside of a particular choice set. Several scholars have suggested that poor people should be more likely to spontaneously consider opportunity costs, because budget constraints should lead to an increased focus on trade-offs. We did not find support for 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 methods of reminding participants of opportunity costs. High-income and low-income participants showed an equally strong decrease in willingness to buy when reminded of opportunity costs, implying that both the rich and the poor neglect opportunity costs. key words: opportunity costs; poverty; scarcity; judgment and decision making",
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Evidence for opportunity cost neglect in the poor. / Plantinga, A.; Krijnen, J.M.T.; Zeelenberg, M.; Breugelmans, S.M.

In: Journal of Behavioral Decision Making, Vol. 31, No. 1, 2018, p. 65-73.

Research output: Contribution to journalArticleScientificpeer-review

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AB - People often neglect opportunity costs: They do not fully take into account forgone alternatives outside of a particular choice set. Several scholars have suggested that poor people should be more likely to spontaneously consider opportunity costs, because budget constraints should lead to an increased focus on trade-offs. We did not find support for 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 methods of reminding participants of opportunity costs. High-income and low-income participants showed an equally strong decrease in willingness to buy when reminded of opportunity costs, implying that both the rich and the poor neglect opportunity costs. key words: opportunity costs; poverty; scarcity; judgment and decision making

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