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Opportunity costs in buying and short selling--Do they really matter?

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  • Shavit, Tal
  • Rosenboim, Mosi
  • Malul, Miki

Abstract

The experimental results of the paper reveal that people do not take into consideration opportunity costs or opportunity profits when buying and short selling lottery tickets. These results are inconsistent with basic economic and finance theories.

Suggested Citation

  • Shavit, Tal & Rosenboim, Mosi & Malul, Miki, 2011. "Opportunity costs in buying and short selling--Do they really matter?," Economics Letters, Elsevier, vol. 112(1), pages 122-124, July.
    • Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:122-124
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    References listed on IDEAS

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    1. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
    2. Friedman, La & Neumann, Br, 1980. "The Effects Of Opportunity Costs On Project Investment Decisions - A Replication And Extension," Journal of Accounting Research, Wiley Blackwell, vol. 18(2), pages 407-419.
    3. Shahrabani, Shosh & Shavit, Tal & Benzion, Uri, 2008. "Short-selling and the WTA-WTP gap," Economics Letters, Elsevier, vol. 99(1), pages 131-133, April.
    4. Shane Frederick & Nathan Novemsky & Jing Wang & Ravi Dhar & Stephen Nowlis, 2009. "Opportunity Cost Neglect," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 36(4), pages 553-561, December.
    5. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    6. Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April.
    7. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
    8. Northcraft, Gregory B. & Neale, Margaret A., 1986. "Opportunity costs and the framing of resource allocation decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 37(3), pages 348-356, June.
    9. Ernan Haruvy & Charles N. Noussair, 2006. "The Effect of Short Selling on Bubbles and Crashes in Experimental Spot Asset Markets," Journal of Finance, American Finance Association, vol. 61(3), pages 1119-1157, June.
    10. Eisenberger, Roselies & Weber, Martin, 1995. "Willingness-to-Pay and Willingness-to-Accept for Risky and Ambiguous Lotteries," Journal of Risk and Uncertainty, Springer, vol. 10(3), pages 223-233, May.
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    13. Neumann, Br & Friedman, La, 1978. "Opportunity Costs - Further Evidence Through An Experimental Replication," Journal of Accounting Research, Wiley Blackwell, vol. 16(2), pages 400-410.
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    Cited by:

    1. Niklas Dreyer & Robert M. Gillenkirch, 2019. "Cash versus opportunity costs and revenues in bilateral bargaining," Journal of Business Economics, Springer, vol. 89(4), pages 357-383, June.
    2. Binod Timilsina, 2015. "Competitively Distinct Operations as a Key for Superior and Sustainable Business Performance: An Example from Walmart," Management, University of Primorska, Faculty of Management Koper, vol. 10(3), pages 273-292.
    3. Naveh Eskinazi & Tal Shavit & Mosi Rosenboim & Miki Malul, 2024. "Behavioral biases in short selling—An experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(2), pages 748-757, March.

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