scholarly journals Opportunity Cost Classification of Goods and Markets

2015 ◽  
Vol 13 (1) ◽  
pp. 119-134
Author(s):  
Davor Mance ◽  
Nenad Vretenar ◽  
Jana Katunar
Keyword(s):  
Opportunity Cost ◽  
Economies Of Scale ◽  
Public Expenditure ◽  
Sunk Costs ◽  
Manufacturing Industries ◽  
Opportunity Costs ◽  
Marginal Rate ◽  
Marginal Costs ◽  
Economic Framework

Sixty years ago, Samuelson’s “Pure Theory of Public Expenditure” expounded the classification of goods, and Bain’s “Economies of Scale, Concentration and the Condition of Entry in Twenty Manufacturing Industries” expounded the structure-conduct-performance paradigm. To the present day, rivalry in- and excludability from consumption classify goods, and subadditivity and irreversibility in production classify market structure. Opportunity costs of production in the form of prospective sunk costs incentivise investment and production, and the sunk costs themselves induce subadditivities, specialization and convexity of the marginal rate of technical substitution. Opportunity costs in consumption are determined by the marginal costs of replacement. In light of the recent Nobel price award to Jean Tirole, we revisit some of the forgotten discussions and clarify some of the terminology under a more economic framework of opportunity costs.

scholarly journals Un-Vignetting vignettes

Pomorstvo ◽  
2017 ◽  
Vol 31 (1) ◽  
pp. 60-66
Author(s):  
Davor Mance
Keyword(s):  
Opportunity Cost ◽  
Primary Source ◽  
Sunk Costs ◽  
Opportunity Costs ◽  
Marginal Costs ◽  
Pricing Scheme ◽  
Pareto Efficient ◽  
Differential Pricing ◽  
Optimal Quantity ◽  
Economic Criteria

In the art of photography, the phenomenon of vignetting means blurring of an image at its periphery compared to its centre. Vignettes are a form of road pricing independent of travel distance. Their usage in Croatia was recently rejected while in Europe, the number of countries using them, is increasing. The economic question of using vignettes as a primary source of revenue for the financing of Croatian highways was blurred by economically peripheral but politically sensitive welfare transfer issues. There has been no visible attempt to push the discussion back into the field of economics by using purely economic criteria such as: opportunity cost of usage, “sunk costs”, marginal costs, and total costs recovery. The paper aims at un-vignetting (un-blurring) the issue and re-focusing it towards economic arguments. The approach taken is a deductive-nomological argument based on opportunity costs of usage. The conclusion is straightforward: the vignettes are Pareto efficient since they make the society in general and the consumers in particular ultimately better off even after taking into account compensations. The opportunity costs of usage of congestion-free roads are zero. The optimal quantity-dependent price is then also zero. Since zero price does not recover costs, a differential pricing scheme needs to be put in place: one that does not depend on distance travelled.

scholarly journals The Rationality of Addiction

2009 ◽  
Vol 2 (2) ◽  
pp. 1-8
Author(s):  
Zhang Chong ◽  
Haoping Liu ◽  
Hyoung Jun Kim ◽  
Qian Wu ◽  
Samuel Xie
Keyword(s):  
Opportunity Cost ◽  
Utility Maximization ◽  
Marginal Utility ◽  
Relative Price ◽  
Opportunity Costs ◽  
Marginal Rate ◽  
Pharmacological Agents ◽  
Economic Theories ◽  
Marginal Rate Of Substitution ◽  
Rate Of Substitution

This paper presents a discussion on the rationality of addiction using economic theories. Drug abuse is the dominant context for addict ion in this paper. However, it does not preclude a broader definition, encapsulating dependence on substances other than pharmacological agents; let it be nicotine , alcohol, coffee, chocolates or sex. The argument follows the progression in rationale from consumption to addiction to eventual remission. The economics of any behaviour, addiction-motivated or otherwise, distils down to the scarcity of means and our intuitions of opportunity costs involved in making a choice. The two concepts are interrelated. The process of decision-making weighs the benefit of each choice (its marginal utility) against its opportunity cost. In utility maximization theory, money is a scarce resource assumed important for maximizing utility. Therefore, choice on consumption is decided by the relative price between two goods. Overall utility is maximized when the ratio of the prices of two desired goods is equal to their marginal rate of substitution – the ratio of their marginal utilities. That is, the objective or source of utility for a consumer is to maximi ze the total value of their available money.

Analysis of Externalities of Economic Activity of the Enterprise

2021 ◽  
Vol 2021 (2) ◽  
pp. 86-94
Author(s):  
Dmytro V. Kozlov
Keyword(s):  
Transaction Costs ◽  
Economic Activity ◽  
Environmental Externalities ◽  
Negative Externalities ◽  
Time Duration ◽  
Marginal Costs ◽  
Positive Externalities ◽  
State And Market ◽  
The Impact

The problems of research of internalities and externalities with the further development of the general classification of externalities of economic activity of the enterprise are defined. The influence of negative and positive externalities on society and enterprise is considered. The concept of negative externalities differs from transaction costs. It is noted that transaction costs can be reflected in cash and can be offset by market inclusion in the price of the products, but this is not possible for externalities. It is emphasized that the purpose of economic activity of any enterprise is to exceed the positive externalities over the negative and achieve the maximum difference between them. The different time duration of the impact of the enterprise on third parties is given. The sign of externalities on the scale of action is emphasized. The externalities of the enterprise are considered in their essence according to the principles of sustainable development, highlighting economic, social and environmental externalities. It is emphasized that economic externalities can arise in the course of the whole business cycle of full-fledged work of all parts of the enterprise. In contrast to economic, social externalities affect people both within the enterprise, that is workers and citizens of the society in which the enterprise operates. And when it comes to environmental externalities, the mediator between the source and recipient of externalities is the environment. Externalities are distinguished according to the means of accounting and the degree of influence on the subject of perception. The necessity of regulation of externalities through internalization and actions of the enterprise with the help of state and market instruments is substantiated. It is emphasized that internalization is the transformation of negative externalities into positive ones in terms of convergence of marginal costs and benefits of the enterprise to marginal social costs and utility.

scholarly journals ANALISIS DIFFERENTIAL COST DAN OPPORTUNITY COST DALAM PENGAMBILAN KEPUTUSAN MEMBELI ATAU MEMPRODUKSI SENDIRI PADA INDUSTRI RUMAH PANGGUNG WOLOAN

2015 ◽  
Vol 13 (03) ◽  
Author(s):  
Romeo Fersi Mongdong ◽  
Jenny Morasa ◽  
Heince Wokas
Keyword(s):  
Cost Analysis ◽  
Analytical Method ◽  
Opportunity Cost ◽  
Raw Materials ◽  
Quantitative Result ◽  
Opportunity Costs ◽  
Business World ◽  
Differential Costs ◽  
The Right ◽  
The Cost

The business world today is characterized by increasing competition among existing companies. Competition occurs in all sectors of the economy both industry, trade, and services. One of the decisions that must be taken in planning at every alternative is to buy or produce itself a component of raw materials. Differential cost are related to the opportunity cost, which is the differential cost incurred costs as a result of certain decisions while the opportunity cost is the cost incurred when choosing a decision. The purpose of this study to analyze the differential costs and opportunity costs in the decision to buy or produce their own on Industri Rumah Panggung Woloan. The analytical method used is descreptive quantitative. Result of the differential cost analysis showed that the right decisions can be taken by the management company the manufactures its own because getting a hihgter differential gain, compared to buying from outside. While the opportunity cost of the buying raw materials from outside is more profitable, thus producing itself becomes more expensive. Should the leadership Industri Rumah Panggung Woloan produce their own wood from the outside becauseit would be more adventageous, compared to taking wood there are kept alone.

scholarly journals Konsep Dasar dan Teknik Manajemen Risiko Perbankan Syariah

2018 ◽  
Vol 4 (1) ◽  
Author(s):  
Ahdiyat Agus Susila
Keyword(s):  
Opportunity Cost ◽  
Decision Makers ◽  
Opportunity Costs ◽  
Adverse Impacts ◽  
Potential Losses ◽  
Negative Impacts ◽  
Uncertain Future ◽  
Definition Of ◽  
The Impact ◽  
Unexpected Outcomes

Often risks arise because of more than one choice and the impact of each option is not yet known for certain, as uncertain future. There is always an opportunity cost that follows every option taken. Thus, risks may be defined as the consequences of uncertain options that have the potential to lead to unexpected outcomes or other adverse impacts to decision makers. This is the classic definition of risk. From this definition, risk contains several dimensions, namely opportunity costs, potential losses or other negative impacts, uncertainty, and obtaining results that do not match expectations. It is with these demands that risks are measured, mitigated and monitored during the business process.  

Development of the oncology opportunity cost assessment tool.

2021 ◽  
Vol 39 (15_suppl) ◽  
pp. e13502-e13502
Author(s):  
Nathan Handley ◽  
Adam F Binder ◽  
Alexandra Gentsch ◽  
Rachel Granberg ◽  
Arianna Heyer ◽  
...  
Keyword(s):  
Focus Groups ◽  
Opportunity Cost ◽  
Assessment Tool ◽  
Cost Of Care ◽  
Cost Assessment ◽  
Opportunity Costs ◽  
Cognitive Interviews ◽  
Patient Level ◽  
Oncology Care ◽  
The Impact

e13502 Background: While awareness of direct patient-level costs of cancer care are growing, less is known about the patient-level opportunity cost of care. Opportunity costs of care may include time spent seeking care, lost wages, lost leisure time, and other indirect costs associated with seeking care. Despite acknowledgment of the importance of considering patient opportunity costs in care treatment decisions, assessment of opportunity costs experienced by individual patients or caregivers is not routinely performed by healthcare providers in general, or oncology providers in particular. The purpose of this work was to develop an instrument, the Oncology Opportunity Cost Assessment Tool (OOCAT), to evaluate patient opportunity cost of seeking oncology care. Methods: Survey development was an iterative process with multiple rounds of stakeholder engagement. First the research team developed a list of potential opportunity cost themes informed by their own experiences. Next, we met with an established patient advisory group within the cancer center to expand this list of themes. We then conducted focus groups with patients and caregivers to explore in further depth their logistical and financial considerations related to seeking care. Findings were used to further expand the list of opportunity cost themes, with this list reviewed in real time with the focus group participants to ensure perspectives were appropriately captured. We then generated a set of survey items to represent each of the themes listed. We generated two items to represent each unique theme. The first item of the instrument sought to quantify the opportunity cost of the theme (e.g. time spent parking); the second component ascertained the patient-perceived importance of the theme using a 7-point Likert scale. Upon drafting of the initial OOCAT, we performed cognitive interviews with a random sampling of patients in order to ensure content validity and clarity of instrument items. Results: We completed 4 virtual focus groups with a total of 23 participants (17 patients and 6 caregivers) followed by cognitive interviews with 13 patients. The resulting OOCAT consists of 17 items that examine time requirements, financial implications, and logistical and quality of life challenges for both patients and caregivers associated seeking oncology care. Conclusions: The OOCAT is a 17-item instrument designed to quantify patient-level opportunity costs of seeking oncology care. Further studies work is needed to validate the OOCAT survey and assess the impact of incorporating quantified assessment of opportunity cost into decision regarding when and where to seek oncology care.

The Use of Electronic Banking and New Technologies in Cash Management

2011 ◽  
pp. 3914-3920
Author(s):  
Leire San Jose Ruiz de Aguirre
Keyword(s):  
Information And Communication Technologies ◽  
Economies Of Scale ◽  
New Technologies ◽  
Driving Forces ◽  
Communication Technologies ◽  
Cash Management ◽  
Unit Costs ◽  
New Information ◽  
Information And Communication

The use of new information and communication technologies (ICT) as a business tool has increased rapidly for the past 10 years (Bonsón, Coffin, & Watson, 2000; Claessens, Glaessner, & Klingebiel, 2000; Vasarhelyi & Greenstein, 2003). More specifically, financial software, e-banking, and the Internet, as core aspects of the various technologies used, have become driving forces behind the expansion of firms and the development of cash management. New technologies are considered as one of the most attractive ways for businesses to increase revenue and achieve economies of scale that can reduce unit costs (Ballantine & Stray, 1998; Barajas & Villanueva, 2001; Daniel, 1999; Daniel & Storey, 1997; Deyoung, 2001; Downes & Muy, 1998; Faulder, 2001; Jayawardhena & Foley, 2000). There are different studies about the use of ICT in the management of the enterprise that explain the obtaining of enterprise performance. Brynjolfsson and Hitt (2000) and Nájera (2005) have done a review of these works and a classification of these types of researches. Unfortunately, there are not specific works or empirical researches about the use of e-banking in cash management; consequently, this work is focused in this. The rest of the chapter is structured as follows. The theoretical foundation on which the study is based is explained in Section 2. Section 3 presents the data and the analysis procedure used to conduct the empirical study. The main results of the investigation are shown in Section 4, and Section 5 presents conclusions. The chapter ends with a list of bibliographical references.

Estimating Maintenance-of-Way Costs for U.S. Railroads After Deregulation

2000 ◽  
Vol 1707 (1) ◽  
pp. 13-21 ◽  
Author(s):  
C. Gregory Bereskin
Keyword(s):  
Economies Of Scale ◽  
Joint Production ◽  
Transportation Services ◽  
Marginal Costs ◽  
Production Economies ◽  
Total Differential ◽  
Cost Behavior ◽  
Simplifying Assumptions ◽  
Costing System ◽  
The Cost

The movement of freight on railroads, like most transportation services, is subject to a number of restrictions that make costing of specific traffic a complex process. Among these restrictions are conditions of joint production; economies of scale, scope, and density; and a lack of data on specific expenditures as related to individual freight movements. Yet costing of specific movements is a desirable activity for shippers, railroads, and regulatory bodies. Traditionally, movement costing has involved the use of accounting-based allocative costing models such as the Uniform Rail Costing System developed by the Interstate Commerce Commission for use in regulatory hearings. Most econometric studies have aimed at characterizing the underlying economic nature of costs with little or no application to the cost of providing a specific service, and as such they may be of little use in costing specific traffic. Moving beyond the historic econometric costing models’ application of economic analysis, cost behavior is evaluated for a single sector of railroad activity. The process involves four steps. First, a consistent econometric model of total railroad expenditures is developed by applying a translog function within a multidimensional definition of railroad output. Second, the model is decomposed into individual partial-elasticity estimates relative to each of the several related intermediate output measures within the framework of a total differential of the cost function. Next, specific traffic movements are defined relative to the measures of rail output. Finally, the total differential is applied using several simplifying assumptions to yield estimates of incremental (marginal) costs for the specific traffic definition.

scholarly journals Do Increasing Markups Matter? Lessons from Empirical Industrial Organization

2019 ◽  
Vol 33 (3) ◽  
pp. 44-68 ◽  
Author(s):  
Steven Berry ◽  
Martin Gaynor ◽  
Fiona Scott Morton
Keyword(s):  
Industrial Organization ◽  
Recent Literature ◽  
Sunk Costs ◽  
Fixed Costs ◽  
Antitrust Enforcement ◽  
Function Estimation ◽  
Marginal Costs ◽  
Price Increases ◽  
Empirical Industrial Organization ◽  
Production Function Estimation

This article considers the recent literature on firm markups in light of both new and classic work in the field of industrial organization. We detail the shortcomings of papers that rely on discredited approaches from the “structure-conduct-performance” literature. In contrast, papers based on production function estimation have made useful progress in measuring broad trends in markups. However, industries are so heterogeneous that careful industry-specific studies are also required, and sorely needed. Examples of such studies illustrate differing explanations for rising markups, including endogenous increases in fixed costs associated with lower marginal costs. In some industries there is evidence of price increases driven by mergers. To fully understand markups, we must eventually recover the key economic primitives of demand, marginal cost, and fixed and sunk costs. We end by discussing the various aspects of antitrust enforcement that may be of increasing importance regardless of the cause of increased markups.

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