Opportunity Cost: What It Is and How to Account for It
Certain external constraints make us overestimate the opportunity cost, as we start to imagine all the foregone options as a missed opportunity and start to see the situation irrationally. This can cause a negative emotional and psychological reaction, like regret.
The opportunity cost in these cases should not be viewed as the sum of all your skipped alternatives, but only the value of the best one which is foregone.
SIMILAR ARTICLES & IDEAS:
Saying 'yes' to something automatically means saying 'no' to other possibilities. This is known as Opportunity Cost. It translates into the potential benefits that we miss b...
It's easy to overlook the cost of hypothetical opportunities. But if neglected, opportunity costs will negatively impact your life, career, and relationships.
If you want to become more aware of opportunity costs in your career, prioritize the important work.
Make a list of your top 5 priorities, keep it in a visible place, and live according to those priorities.
It happens when consumers change their preference between two options when presented with a third option, or decoy.
The decoy is priced to make one of the other options much more attra...
When consumers are faced with many alternatives, they often experience choice overload that increases anxiety and hinders decision-making.
Consumers try to reduce this anxiety by selecting only a couple of criteria (say price and quantity) to determine the best value for money.
A decoy steers you in a particular direction while giving you the impression that you are making a rational, informed choice.
Consider the price of drinks at a well-known juice bar: a small (350 ml) size costs $6.10; the medium (450 ml) $7.10; and the large (610 ml) $7.50. The medium is a slightly better value than the small, and the large better still. The medium is designed to be the decoy, steering you to see the biggest drink as the best value for money.
If you buy the biggest, was it because you made a sensible choice, or have you been manipulated to opt for bigger than intended?
A decision matrix is a table that helps you to visualize the best option between your different alternatives.
It works by getting you to list your options as rows on a table, and the f...