Opportunity Cost Overestimation

Abstract

Consumers often fail to utilize desirable offers they had originally selected and planned to use and thus later regret missing out on them. This failure to follow through induces an opportunity cost. In contrast to prior research findings that opportunity costs tend to be underestimated, the authors propose that in situations where the need to choose arises from external rather than internal constraints, opportunity costs may actually be overestimated. Consumers view choice constraints as external when the necessity to trade off one option for another relates to extraneous resource limitations (e.g., whenever time, budget, or space constraints necessitate choosing between two desirable offers). Conversely, consumers perceive choice constraints as internal when that trade-off is “built-in” (e.g., when a marketing incentive requires choosing between two desirable offers). Five studies demonstrate that choosing on the basis of an external constraint induces consumers to imagine ways in which they can utilize all of the competing options in the choice set. Consequently, consumers feel that by failing to utilize their chosen option, they simultaneously miss out on all options (although in actuality they could have realized only one of those options). Consistent with this conceptualization, only consumers who want to use all of the choice set options simultaneously demonstrate opportunity cost overestimation.