Opportunity costs and the framing of resource allocation decisions

This paper develops and tests an information-processing explanation of the behavior of decision makers when resource allocation decisions meet with setbacks. Findings support the contention that because opportunity costs often are ignored, setback decisions may be framed as choices between certain losses and the possibility of larger or no losses. Making opportunity costs more explicit alters the framing of such decisions and leads to decisions which more closely mirror traditional cost/benefit prescriptions.