Stimulant or Depressant? Resource-Related Income Shocks and Conflict

We provide evidence on the mechanisms linking resource-related income shocks to conflict, focusing specifically on illegal crops. We hypothesize that the degree of group competition over resources and the extent of law enforcement explain whether opportunity cos or contest effects dominate. Combining temporal variation in international drug prices with spatial variation in the suitability to produce opium, we show that in Afghanistan higher prices increase household living standards, and reduce conflict. Using georeferenced data on the drug production network and Taliban versus pro-government control highlights the importance of opportunity cost effects, and reveals heterogeneous effects in line with our theory.

We provide evidence about the mechanisms linking resource-related income shocks to conflict. To do so, we combine temporal variation in international drug prices with new data on spatial variation in opium suitability. We find a conflict-reducing effect of higher drug prices over the 2002-2014 period, both in a reduced-form setting and using instrumental variables. There are two main mechanisms. First, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards. Second, by using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that, on average, opportunity cost effects dominate contest effects. Contest effects depend on the degree of group competition over valuable resources. The conflict-reducing effect of higher prices is higher in areas that are more plausibly dominated by one group.

In this paper, the start-up process is split conceptually into four stages: considering entrepreneurship, intending to start a new business in the next 3 years, nascent entrepreneurship and owning-managing a newly established business. We investigate the determinants of all of these jointly, using a multinomial logit model; it allows for the effects of resources and capabilities to vary across these stages. We employ the Global Entrepreneurship Monitor database for the years 2006–2009, containing 8269 usable observations from respondents drawn from the Lower Layer Super Output Areas in the East Midlands (UK) so that individual observations are linked to space. Our results show that the role of education, experience, and availability of ‘entrepreneurial capital’ in the local neighbourhood varies along the different stages of the entrepreneurial process. In the early stages, the negative (opportunity cost) effect of resources endowment dominates, yet it tends to reverse in the advanced stages, where the positive effect of resources becomes stronger.

Normative economic and accounting theory suggests that opportunity costs ought to be used as an input in economic decisions. Furthermore, the theory suggests that the opportunity costs should be considered equally with any direct costs which may be involved (see, for example, Dopuch, Birnberg, and Demski [1974] and Baumol [1977]). Little research has been carried out, however, to determine whether decision makers do in fact behave as the theory suggests. In two previous studies, Becker, Ronen, and Sorter [1974] and Neumann and Friedman [1978] investigated whether subjects would use opportunity cost information in decisions if they have it available. In the Becker, Ronen, and Sorter (BRS) study, two types of costs were defined: outlay costs and opportunity costs. Outlay costs are negative cash flows, such as for materials, labor, and variable overhead. Opportunity costs reflect a foregone opportunity to receive some positive cash flows. Examples are interest foregone on invested capital or rent not collected because a building was used rather than leased to a third party. BRS presented subjects with a series of choice between two projects, one of which included some opportunity cost information and one of which did not. A statistically significant number of subjects made decisions that indicated they either ignored or discounted the opportunity cost information. Neumann and Friedman (NF) modified the BRS experimental instrument by presenting explicit information about opportunity costs for both

Changes in crop prices have encouraged farmers to consider alternatives, such as potential advanced bioenergy feedstocks, including energy beets. This paper employs an integrated biophysical, economic and GIS-based transportation model to examine the supply of beet-bioethanol from five sites in North Daktoa. The study finds that beet bioethanol could provide net benefits to farmers and ethanol producers in the state, under current market conditions, but only if the bioethanol plant site is carefully selected. More specifically, a 20,000,000 gallon ethanol plant in Valley City could have net returns of $436,049. This plant would acquire 760,000 tons of beets from around the plant site and further east toward the Red River Valley from 22,682 acres of cropland an average distance of 15.7 miles away. The average yield of the selected cropland is 33.5 tons/ac with average net farm returns of $26.09/acre above opportunity costs. Opportunity and transportation costs can substantially change the attractiveness of croplands for beet production. The current market opportunity presented by beet bioethanol at $1.50/gal ethanol is not particularly attractive, but as ethanol prices increase, this opportunity could become attractive at a number of sites throughout the state.

Through an empirical analysis of the impact of variations in the international price of oil on the economic production of different strategic sectors and on energy production from various sources in Ecuador, the study seeks to show evidence on the economic effects of the price of oil. in a Latin American economy strongly linked to oil production. For this, relevant data were collected on production in different economic sectors, on the type of ownership in oil production and on energy production in various energy sources in Ecuador and statistical analyzes were carried out to evaluate the relationships between these and the international oil price. The results indicate that the effect of the oil price varies between the economic sectors of Ecuador. Some sectors, such as financial services and construction, show positive responses, while others, such as agriculture and fishing, appear less affected. The oil and mining sector in Ecuador is strongly linked to variations in the price of oil. The positive and significant response of the Oil and Mines GDP underlines the sensitivity of this sector to changes in international prices. Furthermore, energy production in Ecuador exhibits heterogeneous responses to variations in the price of oil. Forms of energy such as wind, solar, and thermal energy show positive and significant responses, while hydropower presents a negative response in some periods. Positive responses in forms of energy such as wind, solar, and thermal may indicate that the increase in the price of oil positively influences investment decisions in these energy sources. The study provides a significant contribution to the field of energy economics in oil-exporting countries and, particularly, in developing countries, as well as highlights the importance of energy diversification for these types of economies.

Most people experience the feeling of mental fatigue on a daily basis. Previous research shows that mental fatigue impacts information processing and decision making. However, the proximal causes of mental fatigue are not yet well understood. In this research, we test the opportunity cost model of mental fatigue, which proposes that people become more fatigued when the next-best alternative to the current task is higher in value. In 4 preregistered experiments (N = 430), participants repeatedly reported their current level of fatigue and chose to perform a paid labor task versus an unpaid leisure task. In Study 1, all participants were offered the same labor/leisure choice. In Studies 2 and 3, we manipulated the opportunity costs of a labor task by varying the value of an alternative leisure task. In Study 4, we manipulated the opportunity costs of a labor task by varying the value of that labor task. In all studies, we found that people were more likely to choose for leisure as they became more fatigued. In Studies 2 through 4, we did not find that the manipulated leisure value influenced the amount of fatigue participants experienced nor the likelihood to choose for leisure. However, in exploratory analyses, in all studies, we found that participants who reported to value the leisure task more got more fatigued during labor and less fatigued during leisure. Collectively, these results provide cautious support for the opportunity cost model, but they also show that cost-benefit analyses relating to labor and leisure tasks are fleeting. (PsycInfo Database Record (c) 2022 APA, all rights reserved).

Local food prices are key indicators of food security and market conditions. Yet price data are often not available, particularly for rural areas of Sub-Saharan Africa. We compiled data from 168 markets to study spatial and temporal price variation. We found that prices slightly increase when the preceding growing season was dry. Across the continent, there is pronounced seasonal variation, with lowest prices 2–3 months after harvest and highest prices just before harvest. A predictive model explained 42% of the spatial variation in prices. Our results show that spatial and temporal price variation can be generalized and that prices can be estimated for unsampled locations or months. Such estimates may be used to improve the targeting of food security interventions and strengthen empirical policy-oriented research.

We extend previous experimental research on the relevance of cash versus opportunity costs for decision making to a bilateral bargaining setting in which we consider not only cash and opportunity costs, but also cash and opportunity revenues. In the negotiation between a seller and a buyer, a seller’s additional cash cost (cash revenue) reduces (increases) the welfare from trade, i.e., the sum of the partners’ payoffs in case they agree to cooperate, whereas an opportunity cost (revenue) represents a foregone profit (loss) outside the cooperation which does not affect the welfare from trade, but only the gain from trade, i.e., the increase in total payoffs of the two bargaining partners relative to the payoffs they can realize without cooperation. We employ theories of mental accounting and loss aversion to derive hypotheses that contrast bargaining outcomes with a standard-theoretic benchmark prediction implying that the bargaining partners will equally split the gain from trade irrespective of whether the additional item is a cash or opportunity cost or revenue. We hypothesize that prices are less sensitive to the additional item and thus deviate more strongly from the benchmark prediction when the item is an opportunity instead of a cash cost or revenue, because an opportunity cost or revenue is outside, whereas a cash cost or revenue is inside the relationship. We further hypothesize that prices are less sensitive to the item and thus deviate more strongly from the benchmark prediction when the item is an opportunity cost instead of an opportunity revenue, because the opportunity cost is in the gain domain, whereas the opportunity revenue is in the loss domain. Our experimental results support the former, but not the latter prediction. We conclude that the effect of cash versus opportunity costs or revenues on decision making critically depends on the strategic context in which they occur.

Low crop yields in Sub-Saharan Africa are associated with low fertilizer use. To better understand patterns of, and opportunities for, fertilizer use, location specific fertilizer price data may be relevant. We compiled local market price data for urea fertilizer, a source of inorganic nitrogen, in 1729 locations in eighteen countries in two regions (West and East Africa) from 2010–2018 to understand patterns in the spatial variation in fertilizer prices. The average national price was lowest in Ghana (0.80 USD kg-1), Kenya (0.97 USD kg-1), and Nigeria (0.99 USD kg-1). Urea was most expensive in three landlocked countries (Burundi: 1.51, Uganda: 1.49, and Burkina Faso: 1.49 USD kg-1). Our study uncovers considerable spatial variation in fertilizer prices within African countries. We show that in many countries this variation can be predicted for unsampled locations by fitting models of prices as a function of longitude, latitude, and additional predictor variables that capture aspects of market access, demand and environmental conditions. Predicted within-country urea price variation (as a fraction of the median price) was particularly high in Kenya (0.77–1.12), Nigeria (0.83–1.34), Senegal (0.73–1.40), Tanzania (0.90–1.29) and Uganda (0.93–1.30), but much lower in Burkina Faso (0.96–1.04), Burundi (0.95–1.05), and Togo (0.94–1.05). The correlation coefficient of the country level models was between 0.17 to 0.83 (mean 0.52) and the RMSE varies from 0.005 to 0.188 (mean 0.095). In 10 countries, predictions were at least 25% better than a null-model that assumes no spatial variation. Our work indicates new opportunities for incorporating spatial variation in prices into efforts to understand the profitability of agricultural technologies across rural areas in Sub-Saharan Africa.

ABSTRACT: Management accountants have recently migrated toward a business partner role, and as a result they often assist management with the decision-making process. Thus, it is imperative that they excel at identification of relevant information such as opportunity costs. This study experimentally tests the prediction that management accounting experience mitigates the tendency to ignore opportunity costs with respect to two factors: opportunity cost vagueness and project completion stage. This study also investigates whether attending to opportunity costs has an impact on project continuance decisions. Results indicate that management accounting experience mitigates the effect of vague opportunity costs and project completion stage. It was also found that attention to opportunity costs acts as mediator and this in turn reduces the tendency to continue an existing project. This suggests that attending to opportunity costs influences decision-making and that it is likely to have an economic consequence.

Behavioral economics suggest that cannabis reinforcing value (cannabis demand) may be influenced by external, contextual factors such as the social reward that might accompany cannabis use and the presence of opportunity costs (e.g., a next-day responsibility that cannabis use might adversely impact). The present study examined the effect of social context and opportunity cost on cannabis demand and explored whether relations were moderated by cannabis use severity. Adults with past-week cannabis use recruited from Amazon's Mechanical Turk (N = 310; 53.5% female, 79.4% White) completed four purchase tasks, in which participants reported how much cannabis they would purchase across escalating prices, to index cannabis demand under varying contexts: (a) solitary, typical responsibilities; (b) social, typical responsibilities; (c) solitary, substantial responsibilities; and (d) social, substantial responsibilities. The presence of peers significantly increased demand intensity (consumption at zero price) and Omax (maximum expenditure) relative to the solitary conditions. Substantial responsibilities significantly decreased intensity, breakpoint (price at which consumption is fully suppressed), and Pmax (price at which maximum expenditure occurs) and increased elasticity (greater price sensitivity). Demand was most inelastic in the social, typical responsibilities condition relative to other conditions. Cannabis use severity was associated with less elastic demand in the solitary, typical responsibilities condition. Those with higher cannabis use severity reported larger differences in demand intensity and Omax between solitary and social conditions, and in demand elasticity between typical and substantial responsibility conditions. Results are consistent with previous research illustrating social and opportunity costs as determinants of cannabis use behavior. (PsycInfo Database Record (c) 2023 APA, all rights reserved).

The opportunity cost of holding international reserves plays a central role in all models of optimal demand for foreign exchange. This cost is conventionally defined as the difference between the yield on reserves and the marginal productivity forgone from an alternative investment in fixed capital. Most empirical studies have failed to find a significant opportunity-cost effect, since none of them measure it in accordance with its theoretical definition. The results for Israel show that, when this cost is measured properly, it turns out to be a crucial determinant of reserve demand. Copyright 1992 by MIT Press.

Background: Coronary artery disease (CAD) is one of the most common causes of cardiovascular mortality and morbidity in developing countries like India. Initial management includes use of many antianginal drugs. There is wide variation in market prices of these drugs. This study was planned to analyse the percentage variation in prices amongst monotherapy and combination therapy of antianginal drugs manufactured and sold under different brand names in Indian market. Methods: Price of antianginal drugs manufactured by different pharmaceutical companies, in the same strength and dosage forms was obtained from “Current Index of Medical Specialties (CIMS)” January-April 2016 and “Indian Drug Review (IDR)” Vol. XXII, Issue No.1, 2016. The difference in the maximum and minimum price of the same drug manufactured by different pharmaceutical companies and percentage variation in price per 10 tablets was calculated. Results: Percentage variation in price for antianginal drugs marketed in India was found to be amlodipine (5 mg) 1128.57% followed by amlodipine (10 mg) 1040% and amlodipine (2.5 mg) 780% as a monotherapy. Whereas atenolol (25 mg), atenolol (50 mg) and nicorandil (10 mg) also showed significant percentage variation in prices 525%, 426.66% and 350.84% respectively. For combination therapy, percentage variation in prices were seen with amlodipine + atenolol (5 + 50 mg) 700%, followed by atenolol + hydrochlorothiazide (50 + 12.5 mg) 362.5% and Isosorbide dinitrate + aspirin (5 + 75 mg) 300%. Conclusions: There is a wide variation in the price of different brands of antianginal drugs available in India. The clinicians prescribing these drugs should be aware of these variations to reduce the financial burden of drug therapy.

In “The value of nothing: asymmetric attention to opportunity costs drives intertemporal decision making†Read, Olivola and Hardisty (2017) proposed an asymmetric subjective opportunity cost (ASOC) effect to explain and predict why impatience can be detected in intertemporal choice. This work deserves to be replicated and extended for its novel and potentially important findings. The present study aimed to examine the reliability and robustness of the evidence presented by Read et al. by conducting precise replications of their key findings in Study 1. The ASOC effect (Read, et al., 2017) was important for expanding its application and reported to be typically stronger when baseline larger-but-later option (LL) and smaller-but-sooner option (SS) preferences were closer to 50% in the authors’ original condition. Therefore, the present study also aimed to replicate and test the ASOC effect when baseline LL preferences were higher or lower than those in the original condition. We intended to set two additional conditions wherein either LL or SS is more obviously favored (i.e., baseline LL preferences were higher or lower than those in the original condition) by respectively applying the common difference effect (Kirby and Herrnstein, 1995) and the unit effect (Burson, Larrick and Lynch Jr., 2009; Pandelaere, Briers and Lembregts, 2011). Having successfully generated two more obviously favored conditions, the ASOC effect was replicated and confirmed under the original condition and one additional condition wherein SS was more obviously favored. However, the ASOC effect was not detected under the other additional condition wherein LL was more obviously favored. The implications of these findings were discussed.