Opportunity Cost Neglect Attenuates the Effect of Choices on Preferences

Optimization and Benefit Analysis of Grain Trade in Belt and Road Countries

Grain trade in Belt and Road (B&R) countries shows a mismatch between the volume and direction of grain flows and actual demand. With economic and industrial development, the water crisis has intensified, which poses a great challenge to the security of world grain supply and demand. There are few studies on the reconstruction of grain trade relations from the perspective of grain economic value. In this paper, a linear optimization model considering opportunity cost is proposed to fill the gap, and it is compared and analyzed with the optimization model considering only transportation cost. The grain supply and demand structures in both optimization results show characteristics of geographical proximity and long-tail distribution. Furthermore, the economic and water resource benefits resulting from the two optimal configurations are compared and analyzed. It is found that the economic benefits generated by grain trade in B&R countries with the consideration of opportunity cost not only cover transportation costs but also generate an economic value of about 130 trillion US dollars. Therefore, considering opportunity cost in grain trade is of great significance for strengthening cooperation and promoting the economic development of countries under the B&R framework. In terms of resource benefits, the grain trade with consideration of opportunity cost saves nearly 28 billion cubic meters of water, or about 5% of the total virtual water flow. However, about 72 billion cubic meters of water is lost for the grain trade with consideration of transportation cost. This study will help to formulate and adjust policies related to the "Belt and Road Initiative" (B&R Initiative), so as to maximize the economic benefits while optimizing the structure of grain trade and alleviating water scarcity pressures.

Opportunity Neglect: An Aversion to Low-Probability Gains

Seven preregistered studies (N = 2,890, adult participants) conducted in the field, in the lab, and online documented opportunity neglect: a tendency to reject opportunities with low probability of success even when they come with little or no objective cost (e.g., time, money, reputation). Participants rejected a low-probability opportunity in an everyday context (Study 1). Participants also rejected incentive-compatible gambles with positive expected value-for both goods (Study 2) and money (Studies 3-7)-even with no possibility of monetary loss and nontrivial rewards (e.g., a 1% chance at $99). Participants rejected low-probability opportunities more frequently than high-probability opportunities with equal expected value (Study 3). Although taking some real-life opportunities comes with costs, we show that people are even willing to incur costs to opt out of low-probability opportunities (Study 4). Opportunity neglect can be mitigated by highlighting that rejecting an opportunity is equivalent to choosing a zero probability of success (Studies 6-7).

Nudges for Judges: An Experiment on the Effect of Making Sentencing Costs Explicit

Judges are typically tasked to consider sentencing benefits but not costs. Previous research finds that both laypeople and prosecutors discount the costs of incarceration when forming sentencing attitudes, raising important questions about whether professional judges show the same bias during sentencing. To test this, we used a vignette-based experiment in which Minnesota state judges (N = 87) reviewed a case summary about an aggravated robbery and imposed a hypothetical sentence. Using random assignment, half the participants received additional information about plausible negative consequences of incarceration. As predicted, our results revealed a mitigating effect of cost exposure on prison sentence term lengths. Critically, these findings support the conclusion that policies that increase transparency in sentencing costs could reduce sentence lengths, which has important economic and social ramifications.

Category Congruence of Display-Only Products Influences Attention and Purchase Decisions

In e-commerce settings, shoppers can navigate to product-specific pages on which they are asked to make yes-or-no decisions about buying a particular item. Beyond that target, there are often other products displayed on the page, such as those suggested by the retailers' recommendation systems, that can influence consumers' buying behavior. We propose that display items that come from the same category as the target product (matched) may enhance target purchase by increasing the attractiveness of the presented opportunity. Contrasting this, mismatched display items may reduce purchase by raising awareness of opportunity costs. Eye-tracking was used to explore this framework by examining how different types of displays influenced visual attention. Although target purchase rates were higher for products with matched vs. mismatched displays, there was no difference in fixation time for the target images. However, participants attended to mismatched display items for more time than they did for matched ones consistent with the hypothesized processes. In addition, increases in display attractiveness increased target purchase, but only for matched items, in line with supporting the target category. Given the importance of relative attention and information in determining the impact of display items, we replicated the overall purchase effect across varying amounts of available display information in a second behavioral study. This demonstration of robustness supports the translational relevance of these findings for application in industry.

Opportunity Cost in Monetary Donation Decisions to Non-identified and Identified Victims

Do people consider alternative uses of money (i.e., opportunity cost) when asked to donate to a charitable cause? To answer this question, we examined the effect of providing versus not providing participants with an opportunity cost reminder when they are asked to donate money to causes with identified and non-identified victims. The results of two studies show that when making one-time donation decisions, people become less willing to donate to charity when reminded of opportunity cost, but mainly for non-identified victims. Moreover, framing the opportunity cost reminder as prosocial versus proself did not influence willingness to donate. Overall, our evidence suggests that opportunity cost reminders influence people's donation behavior depending on whether charities identify supported victims or not.

Optimal Bidding/Offering Strategy for EV Aggregators under a Novel Business Model

Realizing the full potential of plug-in electric vehicle (PEVs) in power systems requires the development of business models for PEV owners and electric vehicle aggregators (EVAs). Most business models neglect the significant economic potential of PEV demand response. This paper addresses this challenge by proposing a novel business model to optimize the charging energy of PEVs for maximizing the owners’ profits. The proposed business model aims to overcome the opportunity cost neglect for PEV owners, whose charging energy and charging profiles are optimized with full consideration of the demand curves and market conditions. Lagrangian relaxation technology is used for the relaxation of the constraint of satisfying the charging demand, and as a result, the optimization potential becomes greater. The bidding/offering strategy is formulated as a two-stage stochastic optimization problem, considering the different market prices and initial and target state of energy (SOE) of the PEVs. By case studies and analyses, we demonstrate that the proposed business model can effectively overcome the opportunity cost neglect and increase the PEV owners’ profits. Furthermore, we demonstrate that the proposed business model is incentive-compatible. The PEV owners will be attracted by the proposed business model.