Consideration Of Opportunity Costs Research Articles

Cash holdings decision‐making in Spanish family firms: Exploring the impact of heterogeneity

AbstractCash holding decision‐making is one of the main corporate challenges for family firms (FFs), with significant consequences for their growth and survival. It is closely connected to key financial decisions such as financing, investments, and dividends. The motivations behind adjusting cash holdings vary, encompassing precautionary, risk avoidance, opportunity cost considerations, and the spending hypothesis. In our study, we aim to integrate specific motivations for cash holding decisions that stem from the influence of family dynamics within these businesses since FFs have unique characteristics, which affect their financial choices. Therefore, we analyze the impact of family involvement in management and the generational stage of FFs on their level of cash holdings. The results of the partial least squares–structural equation modeling, which was estimated on a sample of 7269 unlisted Spanish FFs, show that the higher the level of family involvement in management, as well as the higher the generational stage, the higher the level of cash holdings, with this having a positive effect on the firm's performance. In addition, we find that the positive relationship between family involvement in management and the level of cash holdings is strengthened by family ownership and weakened by family governance. These findings are relevant for a better understanding of the complexity of cash holding decision‐making in FFs and have practical implications not only for the FFs themselves but also for the entities related to them due to the important links between a firm's liquidity and its risk of default and performance.

Regulatory Focus and Financial Satisfaction: The Sequential Mediating Roles of Construal Level and Opportunity Cost Consideration Among College Students.

Recently, the importance of individual differences has been recognized in the literature of general life satisfaction and domain-specific satisfaction, however, empirical research exploring the relationship between individual differences in self-regulatory focus and financial satisfaction remains relatively sparse, and less is known about the underlying processes that may mediate this relationship. The current study addressed these gaps by investigating whether and how self-regulatory focus (promotion vs prevention) as a motivational trait is related to college students' financial satisfaction. A model was tested in which this association was sequentially mediated by the effects of construal level and opportunity cost consideration. A total of 552 college students (38.6% male; ages 19-25) completed a packet of questionnaires that measured trait regulatory focus, construal level, opportunity cost consideration, and financial satisfaction. The mediation model was tested via multiple regression analyses and bootstrapping procedure. The results supported a sequential mediation model, suggesting that predominantly promotion-focused regulation is associated with information construal at a more abstract level, increasing the consideration of opportunity costs, and subsequently enhancing financial satisfaction. These findings can broaden our understanding of how trait regulatory focus potentially influences financial satisfaction, offering new directions towards improving college students' financial satisfaction.

The framing of choice nudges prolonged processing in the evaluation of food images.

Previous research suggests that the type of choice framing for evaluation tasks can influence the relationship between response time and preference-based decision-making. Two separable factors may modulate the preference-based decision-making: The set of choice options (with or without an option to defer) and the constraint of choice (with high or low maximum for inclusion). To clarify how these factors influence the process of preference-based decision-making, we designed a virtual-shopping paradigm with a series of food images presented consecutively, while varying the set of choice options and the constraint of choice. For the set of choice options, subjects were asked to choose for each food image in either a two-options condition (i.e., "take it" or "leave it"), or a three-options condition (i.e., "take it," "wait," or "leave it"). For the constraint of choice, subjects were instructed to select a maximum of either five items out of 80 (i.e., highly constrained) or 15 items out of 80 (i.e., less constrained). As in previous findings, the response times were consistently longer for "take it" than for "leave it" options. Importantly, this difference was exacerbated under high constraint, when subjects could select only five items, suggesting a role for opportunity-cost consideration in the decision process. Furthermore, as compared to two-options tasks, subjects consistently spent more time overall in the three-options tasks (with the option to defer), displaying lower acceptance rates, and particularly long response times for the "wait" option. This finding suggests that choice framing with a defer option nudges prolonged processing.

To neglect or to consider? Opportunity cost consideration during product sampling can accelerate satiation

AbstractSampling provides limited experience with an offering to promote its purchase, either now or later. Sampling involves an ongoing choice about whether to buy the sampled option. We propose that ongoing choice feels more like a choice when people consider opportunity costs. Consequently, we predict that opportunity cost consideration will accentuate the impact of ongoing choosing on enjoyment over time of the sampled option (i.e., a slope effect). It follows that when ongoing decision evolves toward not choosing the sampled option today, its negative impact on enjoyment should become more pronounced when people consider their opportunity costs, decreasing overall enjoyment. Studies 1, 2, and 3 provided support for this key prediction. Studies 4 and 5 showed that when the best alternative use of a resource people considered was more attractive, they experienced accelerated satiation from an unchosen sampled option. While previous research showed that opportunity cost consideration accentuated the impact of one‐time choice on evaluation (i.e., intercept effect), we showed that it accentuated the impact of ongoing choice on enjoyment over time (i.e., slope effect). We also contribute to the understanding of the factors that increase overall enjoyment of a sampling experience, which should influence future purchase likelihood.

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

AbstractHuman 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.

Optimal maintenance planning with special emphasis on deterioration process and vessel routing for offshore wind systems

Maintenance cost contributes a large portion in total life-cycle cost of offshore wind systems and improves the efficiency of maintenance activities that has emerged as an effective solution in enhancing cost-effectiveness of offshore wind energy. This study proposes a mathematical model to determine the optimal maintenance schedules, by highlighting the deterioration process of offshore wind systems and accounting the optimal vessel routing of maintenance activities, maintenance cost therefore could be shifted to an optimal level. Firstly, reliability of each component is precisely analyzed with respect to the effect of previous maintenance activities. Then, an optimal individual maintenance schedule and a grouping maintenance schedule in daily manner are established based on reliability analysis and opportunity cost consideration. Finally, an optimal maintenance schedule approach accounting vessel routing is apparently presented to optimize the transportation cost of maintenance activities. Numerous influential factors such as system reliability, weather condition, maintenance resource, maintenance duration, production loss cost, and vessel related issues are deliberately examined to enhance the robustness and efficiency of the proposed approach. The experimental results investigating four different scenarios demonstrate that by applying the proposed approach, number of maintenance activity is lowered down, maintenance duration and vessel travelling distance are also significantly reduced in the range of 43.86% - 52.77%, and 52.90% - 58.35%, respectively. Therefore, the economic benefit on maintenance cost could be achieved in an interval of 15.15% - 23.25% by selecting the optimal maintenance schedule.

Estimating Project Cash Flows

The cash flow estimation is important to evaluate projects in view of adding values to the owners’ equity of a firm. Cash flow estimation is a primary requirement for capital budgeting and using project evaluation techniques. Hence, this paper provides cash flow estimation methods from an accounting perspective to facilitate a reader understand the basics and bases of cash flows estimation with suitable exhibits from an accounting point of view. This paper provides explanations on basic principles of project cash flow estimation, meaning of incremental cash flow, trade-off between the equity and debt capitals used in projects, reason for excluding the cost of financing a project, tax concern, opportunity cost consideration, and the process and methods of estimating cash flows.

Building toward a solid foundation: The effect of thinking concretely about the future

AbstractAccording to construal level theory, consumers tend to think about their future abstractly, making it unclear and inexact. Here, a new approach is developed to help people enhance their future‐oriented outcomes by priming them to think about their future concretely. Two experiments show that priming a concrete mindset about the future leads to enhanced future‐oriented outcomes. Specifically, the studies show that participants discounted current funds in favor of future gains less when they were primed with a concrete mindset. Opportunity cost consideration is shown to be the mechanism driving this effect. Though research suggests that most consumers do not consider opportunity costs unless they are explicitly presented to them, priming a concrete mindset increases consideration of opportunity costs so that consumers can make better current decisions that will enhance their future‐oriented outcomes. This research helps to better understand why thinking concretely about the future is beneficial to future‐oriented outcomes.

Towards Improved Guidelines for Cost–Benefit Analysis of Sport and Cultural Events

Consistent evaluation procedures would be necessary to assess correctly the impacts of sport and cultural events, in particular large events. This paper reviews methodological issues in CBA of sport and cultural events based on what appears as the first attempt to provide guidelines for such analysis: the Framework used by New South Wales Treasury. This framework actually deals with most of the questions that an analyst would have to consider on this issue. Based on this document, we propose various possible amendments, which mostly relate to a fuller consideration of opportunity costs, displacement and other General Equilibrium effects. Many of the methodological issues investigated may have an important impact on the analysis results.

A head-to-head evaluation of the diagnostic efficacy and costs of trio versus singleton exome sequencing analysis.

Diagnostic exome sequencing (ES) can be performed on the proband only (singleton; sES) or with additional samples, often including both biological parents with the proband (trio; tES). In this study we sought to compare the efficiencies of exome sequencing (ES) by trio (tES) versus singleton (sES) approach, determine costs, and identify factors to consider when deciding on optimal implementation strategies for the diagnosis of monogenic disorders. We undertook ES in 30 trios and analysed each proband's sES and tES data in parallel. Two teams were randomly allocated to either sES or tES analysis for each case and blinded to each other's work. Each task was timed and cost analyses were based on time taken and diagnostic yield. We modelled three scenarios to determine the factors to consider in the implementation of tES. sES diagnosed 11/30 (36.7%) cases and tES identified one additional diagnosis (12/30 (40.0%)). tES obviated the need for Sanger segregation, reduced the number of variants for curation, and had lower cost-per-diagnosis when considering analysis alone. When sequencing costs were included, tES nearly doubled the cost of sES. Reflexing to tES in those who remain undiagnosed after sES was cost-saving over tES in all as first-line. This approach requires a large differential in diagnostic yield between sES and tES for maximal benefit given current sequencing costs. tES may be preferable when scaling up laboratory throughput due to efficiency gains and opportunity cost considerations. Our findings are relevant to clinicians, laboratories and health services considering tES over sES.

Cultural Differences in Opportunity Cost Consideration.

Two studies were conducted to investigate cultural differences in opportunity cost consideration between Chinese and Euro-Canadians. Opportunity cost is defined as the cost of a benefit that must be forgone in order to pursue a better alternative (Becker et al., 1974). In both studies, participants read about hypothetical purchase scenarios, and then decided whether they would buy a certain product. Opportunity cost consideration was measured in two ways: (1) participants' thoughts pertaining to other (nonfocal) products while making decisions; (2) participants' decisions not to buy a focal product (Study 1) or a more expensive product (Study 2). Across both indexes, we found that after controlling for individual difference variables and amount of pocket money, Chinese participants in China considered financial opportunity cost more than Euro-Canadians in Study 1. Similar results were observed in Study 2 when comparing Chinese in Canada with Euro-Canadians However, the cultural effect on opportunity cost consideration was confounded by family income in Study 2. Implications for resource management, limitations of the current research and directions for future research are discussed.

Perceived trade-off between education and sports career: evidence from professional football

ABSTRACTTo explore the attitudes towards risky career choices of young people in highly competitive environments, we surveyed almost 1000 football players in the youth academies of German professional clubs (Bundesliga), who must generally decide early in their careers whether or not to risk quitting school to focus solely on a professional football career. Based on the survey responses, we empirically analysed which factors influence these youths’ tendencies to choose a high-risk career option over a lower risk one. Our results seem to indicate that such risk taking in competitive environments can be explained by potential benefits expected from this decision, as well as judgments about the likelihood of achieving the desired career. Risk attitudes towards career choices vary by differences in individuals’ estimates of the potential benefits and in particular, in their own assessments of the likelihood of success, which is an important driver of risk acceptance. We also found that opportunity cost considerations influence risk acceptance: the better the low-risk option, the less willing the individual to give it up for a high-risk alternative. In addition, both national origin and level of cultural integration play a role in attitudes towards risky career choices, with reductions in the latter increasing the risk premium of quitting school.

Technology and Social Inequality

In the Fall of 1977 I gave a paper at a conference organized by the Center for Twentieth Century Studies at the University of Wisconsin, Milwaukee. The title of the paper, published in 1980, was “The American Ideal of a Democratic Technology.” Reading it over now, some thirty-seven years later, I am excited all over again by the debate over the nature and role of technology which was so prominent a part of the 1970s, but actually had its roots in the 19th century. But I am also profoundly dismayed by the ways in which America has squandered the insight and the momentum of that debate. Today there are issues with large components of technology and science on the political agenda; fracking and coal seam gas extraction, the spread of crops of genetically modified organisms (GMOs) and the vacuuming up of masses of private electronic data by the National Security Agency (NSA) for example. By and large, however, they are not understood to be part of the same political issue of social inequality. And of course there is still the obfuscating, and therefore dangerous, insistence on using the terms “science” and “technology” strategically when discussing these topics, and still the Sacred Cows such as space exploration and the dream of unlimited energy through fusion which seem to float above any consideration of opportunity costs where real social needs are concerned.

The Capital Budgeting Process of Healthcare Organizations: A Review of Surveys

Several surveys have been administered over the last 40 plus years to learn about capital budgeting practices of healthcare organizations. In this report, we analyze and synthesize these surveys in a four-stage framework of the capital budgeting process: identification, development, selections, and post-audit. We examine three issues in particular: (1) efficiency of for-profit hospitals relative to not-for-profit hospitals, (2) capital budgeting practices of the healthcare industry vis-à-vis other industries, and (3) effects of healthcare mergers and acquisitions on capital budgeting decisions. We found indirect evidence that for-profit hospitals exhibited greater efficiency than not-for-profit hospitals in recent years. The acquisition of not-for-profits by for-profits is credited as the primary reason for growth of multihospital systems; these acquisitions may have contributed to the more efficient capital budgeting practices. One unique attribute of healthcare is the dominant role of physicians in almost all aspects of the capital budgeting process. In agreement with some researchers, we conclude that the disproportionate influence of physicians is likely to impede efficient decision making in capital budgeting, especially for nonprofit organizations.

Tradeoff between time and money: The asymmetric consideration of opportunity costs

This paper investigates how consumers make tradeoffs between time and money with and without reminders to consider the opportunity costs of these currencies and finds an asymmetric pattern in opportunity cost consideration on the part of consumers. When reminded about the opportunity costs of time and money, consumers act to save time but not money when they acquire an experiential possession, and they act to save money but not time when they acquire a material possession. Process tests show that when a consumer acquires a possession that is both material and experiential in nature, her focus shifts to the possession's experiential (material) features when she is reminded about her time's (money's) opportunity cost, and it is this shift in her mindset which leads her to favor saving time over money (saving money over time) to acquire the possession.

Vrednovanje Dobara pri Ocjeni Društvene Opravdanosti Investicionih Projekata / Evaluation of Goods in Assessment of Social Justification of Investment Projects

Rezime Efekti investicija se, u zavisnosti od njihove vrste i veličine, različito mogu manifestovati na privredu, zbog čega je potrebno sagledati različite aspekte njihovog vrednovanja. Polazeći od toga da tržište ne može uvijek i pod svim okolnostima pravilno vrednovati sve robe i usluge s gledišta društva, opravdanost s komercijalnog gledišta se može u mnogome razlikovati od opravdanosti s gledišta društva. Osnovno polazište pri tome predstavlja primjena obračunskih umjesto tržišnih cijena, odnosno sagledavanje oportunitetnih koristi i troškova investicionih projekata, budući da su sastavni dio investicije a ne primjenjuju se u najboljoj alternativnoj upotrebi. Polazeći od nedostataka klasičnih finansijskih analiza u identifikaciji i vrednovanju efekata investicionih projekata sa društvenog aspekta, potrebno je afirmisati pristupe koji se u svijetu sve više razvijaju i dobijaju na značaju.

The Economic Costs of Climate Change: A Multi-Sector Impact Assessment for Vietnam

We adopt a multi-sectoral approach and consider the full range of climate projections. Biophysical damages are translated into economic costs using a dynamic economy-wide model. Our results indicate that the negative impacts on agriculture and roads are modest to 2050. Larger costs are caused by rising sea levels and cyclone strikes. Overall, climate change is likely to reduce national income by between one and two percent by 2050 (relative to a historical baseline). Damages double under more extreme projections. Our findings suggest that there are net benefits from selected pre-emptive actions though careful consideration of opportunity costs is required.

How Electoral Institutions Change the Influence of World Trade Integration on Trade Policies

World integration levels influence opportunity costs of maintaining restrictive national trade policies. In an integrated world, restrictive trade policies are more costly than in a context of low overall levels of world market integration. We argue that policy makers can be expected to react to these varying incentives to liberalize the trade regimes of their countries, yet do so not in a uniform fashion across countries. Rather, the responsiveness to changes in levels of world trade integration is conditional upon the electoral system the country in question employs. This is due to the fact that opportunity cost considerations increase in importance with a) the degree to which policy makers are isolated from the influence of protectionist interest groups; and b) the credibility with which losers of integration can be promised compensation. Both aspects weigh more strongly in countries that employ proportional representation as opposed to majority voting. We test this hypothesis using a model of conditional trade policy diffusion where world levels of integration are treated as diffusion influence that is interacted with a measure of the proportionality of a country’s electoral system. Empirical results support the hypothesis. Moreover, it is shown that it is district magnitude as a measure of proportionality rather than the higher number of parties associated with more proportional voting rules that drives the results.

The effect of opportunity cost consideration on willingness to purchase: The mediating role of indulgence guilt

The effect of opportunity cost consideration on willingness to purchase: The mediating role of indulgence guilt

Kostennutzenanalyse der Therapie von Risikopatienten am Beispiel tiefer Sternuminfektionen

Each and every hospital of any kind is forced, due to increased cost pressure, to work as economically and as efficiently as possible. This even applies when the operational orientations of the hospitals institutions are different. In the present article an analysis of the repercussions of the treatment of postoperative complications in terms of entrepreneurial practice is given. Our focus is on the opportunity cost. A theoretical calculation of opportunity costs is made based on the example of postoperative infections following cardiac surgery and the resulting treatment. The bases of the examinations are the results collected at the hospital Mediclin Herzentrum Lahr / Baden in 2008. The wound healing disorders were recorded from November 2004 until November 2007 and include 3675 patients who were operated on using a median sternotomy. Out of the 3675 patients 45 (1.2 %) were affected. Various treatment options are at hand. The used therapy algorithm in our practice is dependent on the stage and the development of the infection. If the high trim point, the medial trim point and the low trim point of the mediastinitis patients, as well as the average revenue and the surcharge omission on exceeding the high trim point (these data can be found in the annual accounts) and knowledge of the actual length of stay of the mediastinitis patient are known, the opportunity cost, respectively potential turnover increases, can be calculated. Reducing the medial trim point from 48.43 to, for example, 36.37 days could potentially produce a turnover increase of as much as 10 633.41 €. Keeping patient safety in mind, significant turnover increases can be achieved with adequate planning. The considered sales situation, however, can only be achieved under the same terms: these being free operating room and bed capacities, available personnel, equal cost of materials as well as enough patients. The consideration of opportunity costs could be important for entrepreneurs if staff shortage continues and, in economical terms, non-expendable capacities are created.