Evidence for opportunity cost neglect in the poor

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

*Corresponding author for this work

    Research output: Contribution to journalArticleScientificpeer-review

    7 Citations (Scopus)
    137 Downloads (Pure)

    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

    Keywords

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

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