When $10 is greater than $300


By Joanne da Luz, GTA Instructor

Opportunity Cost
I posed this question to the class, “What is the opportunity cost of you coming to class today?”  I encouraged students who couldn’t quite remember the definition to review their concept card.

As students began to share, I walked around the room listening carefully for responses that intimated a dollar value. When I didn’t, I zeroed in on two students; one comparing class to the Lunar New Year family event he was missing out on and another opting out of taking time to clean his bathroom.  Two very different scenarios but useful nonetheless.

I posed the following, “You receive $10 for each class when you arrive on time and participate fully:  So, what did you give up today that is comparable to $10?”  With some expression of disappointment, the former young man shared that he would have received $300 in his red envelope at the Lunar New Year family event.  When I prompted him to think about how today’s class value now jumped significantly from $10 by almost 300%, he was shocked at first. He explained how the class had value for him other than the $10 namely, the pure experience of learning something new, having the class listed on his resume and college applications.  The latter student then quickly asked, “So, how do I calculate the value of my opportunity cost?  I wasn’t going to get $300!”  I asked him to estimate how much he would pay himself or someone else to complete the task of cleaning his bathroom (his classmates joined in offering minimum wage hourly rates, asking how long it takes him, etc).  He insisted that he wouldn’t pay anyone at all and he was fine with his bathroom not being clean tonight.  We concluded together that, for him, the benefit of coming to class exceeded the opportunity cost of not cleaning his bathroom, ultimately assigning less than a $10 value to the work required to clean his bathroom and/or the satisfaction of knowing that it is indeed clean.  

Often, young people don’t really take time to evaluate the opportunity cost of a decision nor do they realize they can assign a dollar value for perspective (not to say that the dollar value of a decision is everything… we certainly DON’T teach that at Game Theory Academy!) And, as counter-intuitive and illogical as it may seem, when $10 is somehow greater than $300, it’s because preferences, values, goals and dreams can absolutely outweigh financial rewards, especially for strategic decision makers like our GTA students!