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

Abstract

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.