Opportunity cost neglect and consideration in the domain of time

Spiller, Stephen A.

doi:10.1016/j.copsyc.2018.10.001

Cited by 16 publications

(14 citation statements)

References 55 publications

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“…We try to gather sufficient information to decide correctly, but also try not to lose time and resources gathering unnecessary information. Speed-accuracy trade-offs are of particular importance for research on bounded rationality in societal, political, ecological, and economic problem contexts, involving such fundamental issues as information cost and opportunity cost (Payne, Bettman, & Luce, 1996; Spiller, 2019), satisficing decision strategies (Simon, 1955), and cost-benefit analysis (Swets, Dawes, & Monahan, 2000).…”

Section: Speed-accuracy Trade-offsmentioning

confidence: 99%

“…Metacognitive myopia. Apart from these specific problems, the persistence of a strong accuracy bias in sample-based choices fits neatly into a growing body of evidence on metacognitive myopia, conceived as a general impediment to rational JDM, due to a lack of critical metareasoning (Fiedler, 2012;Fiedler, Ackerman, & Scarampi, 2019;Spiller, 2019). Metacognitive myopia refers to the reluctance to reflect on the constraints and sources of invalidity in the environment and in one's own higher order cognitive functions, even when these constraints are incontestable and easy to understand.…”

Section: Understanding the Metacognitive Deficitmentioning

confidence: 99%

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Speed-accuracy trade-offs in sample-based decisions.

Fiedler¹,

McCaughey²,

Prager³

et al. 2021

Journal of Experimental Psychology: General

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Success on many tasks depends on a trade-off between speed and accuracy. In a novel variant, a speed-accuracy trade-off with sample-based decisions in which both speed and accuracy jointly depend on (self-truncated) sample size, we found strong accuracy biases. On every trial of a sequential investment game, participants chose between 2 investment funds based on binary samples of the funds’ past outcomes. Participants could stop sampling and decide whenever they felt sufficiently informed. Total payoff was the product of choice accuracy and number of choices completed within the available time (speed). Participants’ failure to understand the dominance of speed over accuracy—that speed decreases more than accuracy improves with increasing sample size—led to dramatic oversampling. Our research aimed to examine to what extent metacognitive functions of monitoring and control could correct for the accuracy bias. Experiments 1a through 1c demonstrated similarly strong accuracy biases and payoff losses in psychology and economics students, depressed, and control patients. In Experiments 2 through 4, the accuracy bias persisted despite several manipulations (feedback, sample limit, choice difficulty, payoff, sampling truncation as default) that underlined the speed advantage, reflecting a conspicuous metacognitive deficit. Even when participants faced no risk of losing on incorrect trials but could still win on correct trials (Experiment 3) and when sampling was contingent on the active solicitation of every new element (Experiment 4), participants continued to sample too much and failed to overcome the accuracy bias. The final discussion focuses on psychological reasons and possible remedies for the metacognitive deficit in trade-off regulation.

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Section: Speed-accuracy Trade-offsmentioning

confidence: 99%

Section: Understanding the Metacognitive Deficitmentioning

confidence: 99%

Speed-accuracy trade-offs in sample-based decisions.

Fiedler¹,

McCaughey²,

Prager³

et al. 2021

Journal of Experimental Psychology: General

View full text Add to dashboard Cite

show abstract

“…The most important difference between time and money in the case of opportunity cost consideration is fungibility (Spiller, 2019).…”

Section: Opportunity Cost Of Timementioning

confidence: 99%

“…The difference between time and money Opportunity cost consideration contains the concept of intertemporal choice because using a resource now means that this resource is unavailable in the future (Spiller, 2019), and the literature on intertemporal choice takes the opportunity cost concept into consideration (Zauberman & Urminsky, 2016). The typical intertemporal choice case involves choosing between a smaller sooner reward (e.g., $5 today) and a larger later reward (e.g., $10 next year) (Spiller, 2019). Although it is obvious that choosing $5 today means $0 next year, and choose $10 next year means $0 today, people might ignore opportunity cost in intertemporal choices that have money as an outcome (Zhao et al, 2015).…”

Section: Opportunity Cost In Intertemporal Choicesmentioning

confidence: 99%

“…We are supposed to compare all the alternatives based on the utility we can gain. In practice, we cannot compare different alternatives easily and calculate the opportunity cost because resources are not fully fungible (Spiller, 2019). Some researchers believe that the opportunity cost of money is easier to assess (in comparison to other resources, such as time) because of its fungibility (Okada & Hoch, 2004).…”

Section: Opportunity Cost In Behavioral Economics and Consumer Behaviormentioning

confidence: 99%

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Opportunity cost in consumer behavior: Definitions, operationalizations, and ambiguities

Haghpour

Sahabeh

Halvari

2022

Int J Consumer Studies

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Human beings have countless desires but bounded resources, and this limitation makes them choose between alternatives. Consumers are encouraged to be aware of the best alternative use of a resource (e.g., money and time), which is known as the opportunity cost of their choice. The current systematic review addresses existing debates and ambiguities surrounding opportunity cost consideration by consumers. We review the origins, different definitions, antecedents, associated decisions, and outcomes of opportunity costs consideration through a detailed examination of the relevant literature from multiple disciplines such as marketing, psychology, and economics. The SPAR‐4‐SLR protocol is used to conduct the review and the ADO (Antecedents, Decisions, Outcomes) framework is used to organize our findings. We highlight and reconcile two different perspectives on the conceptualization of opportunity cost as the forgone value (by considering willingness to pay) versus the physical market value of the second‐best alternative. Different antecedents of opportunity cost consideration are categorized into three categories: individual differences, situational variables, and information processing method. We discuss when and why consumers tend to neglect the opportunity cost, in which situations they are more likely to overestimate the opportunity cost, and what is the difference between consideration of opportunity cost of time and money. Results show that despite what the economics literature suggests, opportunity cost consideration does not always lead to positive outcomes. Based on the literature of regret theory, and differences between maximizers and satisficers, we discuss how opportunity cost considerations might lead to choice discomfort, regret, and dissatisfaction.

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A joint account with my future self: Self‐continuity facilitates adjustment of present spending to future income changes

2023

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Is consumers' present spending influenced by future changes in their income? From an economic perspective, consumers should reduce present spending when anticipating a future income decrease and boost spending when anticipating a future income increase to maximize their welfare. We find that although consumers tend to adjust their spending to a future income decrease, they are less likely to do so to a future income increase. We show that this is, in part, due to a low sense of self‐continuity, a tendency to view the future self whose income increases as if it were a different person and, as a result, to categorize present and future income into two separate mental accounts. Enhancing self‐continuity leads consumers to combine present and future income in a single mental account, and thereby facilitates adjustment of present spending to a future income increase. Whereas prior work linked high self‐continuity to reduced present spending, we identify a context in which high self‐continuity can boost present spending. We discuss the implications of these findings for consumer well‐being.

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Opportunity cost neglect and consideration in the domain of time

Cited by 16 publications

References 55 publications

Speed-accuracy trade-offs in sample-based decisions.

Speed-accuracy trade-offs in sample-based decisions.

Opportunity cost in consumer behavior: Definitions, operationalizations, and ambiguities

A joint account with my future self: Self‐continuity facilitates adjustment of present spending to future income changes

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