Concept Of Opportunity Cost Research Articles

On value frameworks and opportunity costs in health technology assessment.

Proceeding from a basic concept underpinning economic evaluation, opportunity cost, this study aims to explain how different approaches to economics diverge quite dramatically in their ideas of what constitutes appropriate valuation, both in principle and practice. Because the concept of opportunity cost does not inherently specify how valuation should be undertaken or specify how appropriate any economic value framework (EVF) might be, the three main economics-based approaches to providing evidence about value for health technology assessment are described. This paper describes how the three main EVFs-namely, the extra-welfarist, welfarist, and classical-are most typically understood, applied, and promoted. It then provides clarification and assessment of related concepts and terminology. Although EVFs differ, certain underlying characteristics of valuation were identified as fundamental to all approaches to economic evaluation in practice. The study also suggests that some of the rhetoric and terms employed in relation to the extra-welfarist approach are not wholly justified and, further, that only the welfarist approach ensures adherence to welfare-economic principles. Finally, deliberative analysis, especially when connected with a classical economic approach, can serve as a useful supplement to other analytical approaches. All three approaches to economic evaluation have something to offer assessment processes, but they all display limitations too. Therefore, the author concludes that the language of economic evaluation should be used with sufficient humility to prevent overselling of EVFs, especially with regard to the qualities of evidence they provide for priority setting processes.

Explaining farmers\u2019 reluctance to adopt recommendations for sustainable ecosystem management

IntroductionThe lower Syr Darya River Basin is an integral part of the Aral Sea Basin that is shared by four riparian countries. In Kazakhstan, the water is mainly used for agricultural purposes. However, the poor quality and insufficient quantity of water and the overall degradation of natural resources due to unsustainable management practices threaten the profitability of the sector. The situation is even worse for downstream users. Three alternative scenarios for sustainable water and land management were developed using the RIOS and SWAT models as decision support tools. The scenario that offered the highest water and land productivity was presented to farmers to assess their willingness to forgo their current practices and adopt proposed management practices.We introduce willingness to forego (WTF)—a qualitative approach and a variant of the concept of opportunity costs to look beyond hypothetical markets to trading current benefits for future returns. We also tap into literature on agricultural risk management to provide additional insight into farmers’ rationale behind their choices.ResultGenerally, despite their stated preference to conserve ecosystem services, farmers’ actions were found to be inconsistent with the proposed sustainable management. WTF analysis revealed that farmers’ desire to maximize current benefits and more importantly to minimize future risks override all sustainability considerations. Their WTF current benefits mainly depended on their location along the canal and hence their access to water and land, overall cost of production, market conditions that informed their crop choices, and the cost of adopting recommended packages. While the results remain specific to this case, they are consistent with the literature that links farmers’ behaviors to ecological performances.ConclusionsThe study highlights the limitations of decision support tools and other valuation approaches including willingness to pay (WTP) and willingness to accept (payment) (WTA), to capture the delicate trade-offs that need to be considered to ensure household food and income security and encourage adoption of sustainable ecosystem management practices. Adequate information on potential effects of proposed conservation measures on yield, markets and hence farm profits, and availability of other alternatives are critical in shaping farmers’ decisions.

Assessing the opportunity costs of patients with multidrug-resistant organisms in hospitals.

The concept of opportunity cost can be applied to the utilization of hospital beds with special focus on patients colonized or infected with multidrug-resistant organisms. Blocked beds due to isolation measures or increased length of stay may result in opportunity costs if newly arriving patients have to be rejected and the hospital is confronted with revenue foregone. However, the amount of these costs is unclear, since different approaches are used in the literature to determine the respective costs. Our paper develops a concept to assess opportunity costs from the perspective of a hospital. The analysis is two-stage. In a first step, the probability of rejecting a patient due to over-occupancy in a hospital is calculated with a queuing model and a Monte Carlo simulation taking various assumptions into account. In a second step, the amount of the opportunity costs is calculated as an expected value applying a stochastic approach based on a potential patient pool. Opportunity costs will occur only with a probability that is influenced, among others, by current bed occupancy rates. They have to be measured by average net revenue foregone, i.e., by the difference between average revenue foregone and average costs avoided. Previous studies have a tendency of overestimating the occurrence or the size of opportunity costs with regard to the use of hospital beds. Nonetheless, its influence on the hospital budget is crucial and should be determined exactly.

Development of Economic Assessment of Technologies

This article presents various theoretical and methodological approaches to technology assessment, which are applied in Russia and abroad. It classifies and describes the milestones of development of such assessment methodology and tools in our country, covering the period from 1960s till present. The article provides results of analysis of technology assessment methods and techniques, which are used in Russia and abroad. Fundamental differences between technology assessment indicators, which are based on the cost and discounted cost concepts, and indicators, which are based on the opportunity cost concept, were determined. Analysis of development of methods and models of economic assessment of technologies points out to their consistency. In their economic essence, all of them are based (in the modern context) on the same general methodology of assessment of results and costs in different combinations and modifications thereof. However, existing assessment methods do not allow to assess (in an integrated manner) dual-use technologies, which are widely applied in Russia. Therefore, we offered a new integrated approach to development of the methodology and tools of economic assessment of technologies applied in various sectors of the economy (civil and military). The tools for implementation of such approach were developed in a form of economic and mathematical models. They allow to estimate an integrated economic effect of technologies when used in civil and military sectors, which is very important in the current situation. Practical application of such models will allow to assess (in a systemic manner) the effects from creation and implementation of dual-use technologies. The article identifies basic trends in further study of this applied research task and the most acceptable methods thereof. DOI: 10.5901/mjss.2015.v6n4s4p22

Demand, Supply, and Sustainability: Reflections on Kenneth Boulding's Evolutionary Economics

Drawing upon his original ecological approach to evolutionary economics, Kenneth Boulding developed a systems-theoretic reconstruction of the neoclassical supply-and-demand framework. He located the systems-theoretic meaning of the neoclassical concept of opportunity costs in the limits of the environmental carrying capacity, which are centrally emphasized by ecological economists and sustainability scholars. An implication of his argument is that the neoclassical supply-and-demand framework presents a variety of the general systems theory that suffers from being grounded in the attenuated concept of the environment. This article explores the options for broadening this concept by revisiting the work of Niklas Luhmann and C. West Churchman. Their ideas are shown to underlie an alternative systems-theoretic framework that is capable of incorporating the contemporary concerns about the societal and ecological sustainability of economic activity.

The Rhetoric of Opportunity Cost

A well-known survey of economists revealed that many of them could not correctly answer a basic question on the concept of opportunity cost. In this paper, I connect the concept of opportunity cost to the familiar apparatus of marginal analysis—the equality of prices and marginal rates of substitution at the margin. When opportunity cost is understood this way, it forces one to be clear about units and about the difference between discrete and continuous variables. A more general understanding of opportunity cost can link basic principles-level examples with more advanced technical examples and improve the stories that make up the rhetoric of basic economics instruction.

It Is All Predatory Pricing: Margin Squeeze Abuse and the Concept of Opportunity Costs in EU Competition Law

Margin squeeze as a stand-alone category of abuse of dominant position appears to be redundant. The imputation rule used in EU competition law in margin squeeze cases does include opportunity costs and is often a good proxy for the relevant costs of the dominant firm, although it does not only protect equally efficient competitors, but also reasonably efficient competitors. Including opportunity costs in EU competition law assessment of exclusionary practices distils every abusive margin squeeze to a predatory pricing case, caught by the Court's predatory pricing-test laid down in AKZO.

A Recognition of The Cost based on The Concept of Opportunity Cost

A Recognition of The Cost based on The Concept of Opportunity Cost

Una revisión analítica sobre el papel de la tierra en la teoría económica de David Ricardo

<p>Este artículo tiene como objetivo central analizar el papel del recurso tierra en la teoría económica de David Ricardo como primer acercamiento al análisis económico de los recursos naturales. Esto se realiza mediante una revisión bibliográfica analítica de la obra de Ricardo y de otros autores en torno a la misma. En este sentido, se examina el concepto de renta de la tierra, así como los planteamientos en torno a la llamada ley de los rendimientos decrecientes. Asimismo, se establecen algunas reflexiones críticas con relación al enfoque de la renta de la tierra. Un resultado importante del trabajo es que en el análisis de la renta de Ricardo está ausente el concepto de costo de oportunidad, lo cual implica una reconsideración del concepto de renta para abordar el análisis económico de recursos naturales.</p>

DEMONSTRAÇÃO DE RESULTADO ECONÔMICO: PERCEPÇÃO DO COMANDO DA AERONÁUTICA DO BRASIL

No ano de 2010, uma alteração no quadro normativo brasileiro introduziu a Demonstração do Resultado Econômico (DRE) para o setor público, que busca comparar custos internos de produção com valores de mercado, segundo o conceito de custo de oportunidade. Este estudo procura analisar as possíveis respostas estratégicas dos gestores , buscando perceber se a cultura contábil existente no País permite a aceitação do novo instrumento. Por meio das percepções dos agentes públicos do Comando da Aeronáutica (Comaer), no Brasil, conclui-se que a resposta estratégica dos entrevistados tende para a atitude de aceitação da nova rotina, demonstrando traços de menor conservadorismo e maior interesse pela evidenciação de resultados.

Between a “ROC” and a School Place: The Role of Racial Opportunity Cost in the Educational Experiences of Academically Successful Students of Color

Despite numerous reform efforts, schools have not achieved equitable academic outcomes for all students. To better identify where schools have failed, research has sought to understand the complex role the school environment plays in mediating academic success, particularly for students of color. In this article, we forward the concept of racial opportunity cost and then use it as a lens to encapsulate the price academically successful students of color pay in their pursuit of school success. Through individual and focus group interviews, 18 African American and Latina/o students revealed nuances of the costs their academic achievement brought in the racialized, White-normed spaces that often permeated their school cultures. The purpose of this article is to provide theoretical support for the racial opportunity cost concept using existing interdisciplinary scholarship and to describe the racial opportunity costs that emerged from our analysis of student interviews.

Bailouts, Opportunity Cost and Utilitarian Ethics: A Law & Economics Analysis

This article applies the concepts of opportunity cost and utilitarian ethics to corporate bailouts. When one thinks about bailing out a failing or distressed industry it is also necessary to consider alternative uses for the funds. Opportunity cost analysis concludes that the funds used for bailouts could be better utilized elsewhere. Utilitarian analysis, the dominant methodology among economists, also concludes that funding bailouts cannot be justified. This article constructs a simple mathematical model that is based on utilitarian analysis and concludes that bailouts cannot be ethically justified on utilitarian grounds because the result is a negative-sum game. Possible avenues for future research are also identified and discussed briefly.

我国农业生态效率的时空差异分析

Combining a strong economic performance and a sustainable use of natural resources is one of the major objectives of current Chinese agricultural policy. Agricultural eco-efficiency facilitates assessing sustainable development of agriculture in an integrated way,thus providing good guidance for decision making. For panel data from 2003 through 2010,a valuation approach—based on a capital analysis and the concept of opportunity costs—is used to assess agricultural eco-efficiency in China. In addition,benchmarking is an important component of the approach,because it reflects a judgment in determining the cost of all capital forms. These capital forms are land,labor,agricultural water consumption, chemical fertilizer,plastic film,pesticide,diesel,gross power of agricultural machinery,chemical oxygen demand( COD) and total nitrogen. Two benchmarks were chosen,the weighted average return on capital and the best economic performance of each capital form. Depending on the applied benchmark,it was found that the two measures of eco-efficiencies differed, but the variations were similar year to year. Because the main objective of this paper is to understand why evaluation objects differ in their eco-efficiency,our assessment adopted the first benchmark. A regression model was then introduced to analyze the determinants of eco-efficiency. The key results are as follows:( 1) Using the weighted average return on capital form as a benchmark,the average ecological value is negative in 2003,increasing to a maximum in 2010. The value went from negative to positive in 2007. Among the ten capital forms considered,labor capital and COD capital proved to be the critical resources and drivers for value creation in different years. Agricultural eco-efficiency in China is low,but recorded significant progress over the observed period. A low average eco-efficiency of 0. 7 was calculated in 2003,increasing to almost 1. 34 in 2010.( 2) Spatial distribution characteristics are also significant. The agro-ecological areas in the Northeast Zone,Loess Plateau Zone and Huang-Huai-Hai Plain Zone,which are the traditional major grain-producing areas in China, have a low rate of eco-efficiency. Provinces located north of the Qinling Mountains-the Huaihe River line,comprising the Heilongjiang,Shanxi,Ningxia,Gansu and Xinjiang main grain-producing areas,recorded lower values of eco-efficiency in 2010 than in 2003. Conversely,southern provinces such as Sichuan and Hainan had a high eco-efficiency rate. The reasons behind these regional differences are explained in the study.( 3) Taking into account the resource endowment of agricultural production,the characteristics of labor,the input of resources,and the effects of agricultural policy,our empirical model shows that both structural and managerial characteristics have an impact on eco-efficiency. For example, cultivation area per crop and education level of farmers have a significant positive effect on eco-efficiency. A managerial characteristic is chemical fertilizer application per area. More chemical fertilizer application per area leads to a lower ecoefficiency rating in China. The gross power of agricultural machinery,agricultural water consumption,and subsidy levels show similar results as chemical fertilizer application per area. Overall,the study is useful in its identification of weak points in agriculture development in China,information that may support future development of relevant policies and government interventions.

Conceito de custo de oportunidade aplicado à demonstração contábil do setor público

This paper aims to simulate an environment of decision-making, focusing on an evaluation of the application of the concept of opportunity cost in the construction of financial statements, specifically of the use of this concept in the Income Statement. The Agency Theory and Behavioral Finance have divergent views about the role of rationality in the process of decision-making, arguing that other aspects join rationality and are equally or more important than the latter to determine choices in the decision-making process. The environment proposed for the assessment of decision-making was created trying to eliminate other relevant variables that might aff ect that process. The construction of the research environment was inspired by the experiments conducted by Ariely in his book “Predictably Irrational”. The respondents of the survey were selected among the students of Federal University of Paraiba’s courses in Accounting, Business Administration and Economics of several semesters, thus avoiding a concentration of respondents who were at the beginning or the end of the course. When analyzing the results of the questionnaires, it becomes clear that the process of decision-making is affected by aspects such as the shape and position in which information is displayed. It is concluded that it is difficult to apply the opportunity cost as the basis for the construction of the Statement of Income, since it is impossible to meet the Brazilian Accounting Standards Applied to the Public Sector and especially NBC T 16.11, which deals with the cost system in the public sector, where it is claimed that the cost information should have comparability as one of its main att ributes. Keywords: opportunity cost, decision-making, public sector.

Anthony G. Hopwood: Academic Iconoclast and Entrepreneur 1944–2010

A nthony Hopwood was born on May 18, 1944 in Stoke-on-Trent in England and died on May 8, 2010 in Marlow, England. He was a pioneer in behavioral accounting research. He contributed to that area with both his research and as the founding editor of Accounting, Organizations and Society (AOS), the leading behavioral accounting research journal, the reason for which he likely is best well known by scholars internationally, both in and outside of accounting. He held that position for 35 years. As Zeff (2008, 3) described it, in his remarks introducing Anthony at his Hall of Fame induction:

Another way to understand the real options value for engineers

This paper is concerned with explaining real options values (ROV) using an opportunity cost concept. Through exploring the opportunity costs embedded in the ROV, we hope that the following presentation will be helpful for engineers to understand the meaning of the terminologies relevant to the ROV. With this belief, we performed the work under which the real investment project was delayed by 1 year only. The three different opportunity costs were explored in this work for the purpose of the paper as follows: an interest earning opportunity, an opportunity loss, and an expected opportunity gain. A short numerical example was demonstrated to show that the real options value derived with the three opportunity costs was equivalent to the value done with the binomial lattice model proposed by Cox, Ross, and Rubinstein.

EMPREGO DO CONCEITO DE CUSTO DE OPORTUNIDADE NA ESCOLHA DE RAÇÃO PARA A PRODUÇÃO DE LEITÕES

Este estudo tem por objetivo levantar os custos de ração para a criação de leitões a fim de averiguar qual o valor sacrificado com a escolha da opção mais rentável para o suinocultor à luz do conceito do custo de oportunidade. Na produção de leitões, a ração é responsável por cerca de 70% dos custos e, por isso, qualquer variação pode impactar significativamente no lucro do produtor. Nesse artigo são analisadas três maneiras de aquisição de ração para a produção de leitões: aquisição da ração pronta (industrializada); aquisição do milho para produção na propriedade e, produção tanto do milho quanto da ração na propriedade do produtor. Dada a diferença entre os processos de fabricação destes produtos podem ocorrer variações na qualidade e, por esse motivo, realizou-se teste empírico com os três tipos de ração a fim de averiguar qual destes possui melhor desempenho com os leitões. Considerando os resultados obtidos, é possível afirmar que a ração fabricada na propriedade com o milho produzido pela mesma é a opção mais vantajosa, pois possibilita melhor retorno financeiro ao produtor.

Is Bus Versus Rail Investment a Zero-Sum Game?

Problem, research strategy, and findings: Bus and rail transit are often assumed to compete for the same pot of transit dollars, with one, therefore, substituting for another. Advocates for each mode lobby accordingly. However, this article presents evidence that spending on the two transit services may be unrelated or even complementary, based on a multivariate analysis of transit spending in the 55 largest U.S. metropolitan statistical areas from 1992 through 2006. In all the estimated models, using a robust set of controls and statistical strategies, bus spending is positively associated with rail spending; that is, spending on the two modes rise or fall together. This supports the argument that, over the long term, rail investment does not come at the expense of bus investment; the existence of a tradeoff between the modes in investment spending is not supported. Takeaway for practice: Many conventional transportation policy debates presume bus and rail spending is a zero-sum game, with investment in rail transit, therefore, coming at the cost of lower bus investment. By contrast, this analysis suggests an alternative scenario: Spending on one transit mode is, in general, positively associated with spending on other modes. This may occur because of needed interaction between the modes, as with feeder bus service, through the fostering of transit-supportive land uses or through broadening of transit coalitions into more affluent sectors of society. Assertions that rail investment inherently requires cutbacks in buses stems from a rhetorical misuse of the opportunity-cost concept. Research support: Environmental Protection Agency project RD-83334901-0.

Novel Approaches to the Parametric Cubic-Spline Interpolation

The cubic-spline interpolation (CSI) scheme can be utilized to obtain a better quality reconstructed image. It is based on the least-squares method with cubic convolution interpolation (CCI) function. Within the parametric CSI scheme, it is difficult to determine the optimal parameter for various target images. In this paper, a novel method involving the concept of opportunity costs is proposed to identify the most suitable parameter for the CCI function needed in the CSI scheme. It is shown that such an optimal four-point CCI function in conjunction with the least-squares method can achieve a better performance with the same arithmetic operations in comparison with the existing CSI algorithm. In addition, experimental results show that the optimal six-point CSI scheme together with cross-zonal filter is superior in performance to the optimal four-point CSI scheme without increasing the computational complexity.

An Opportunity Cost Model to Value a Deferral Option

This paper discusses the real option valuation approach based on the familiar opportunity cost concept. The model presented decomposes the deferral option value into four contributing components - interest earning opportunity, expected opportunity gain, present value, and investment cost. After demonstrating the equivalence of the opportunity model to Cox, Ross, and Rubinstein’s (CRR) binomial lattice approach, its attributes are discussed through simple numerical examples. In contrast with the CRR approach, the opportunity model’s transparency provides an intuitive and economical baseline for managerial discussion and decision-making. Additionally, the appropriateness of risk-neutral probabilities to value real options is discussed in the context of actual (or real) probabilities. Finally, it should be emphasized that the discussion of the paper be concentrated on the opportunity costs inherently embedded in the real options value, therefore, it is different from other works per se which consider them as the exogenous input to the real options value