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Opportunity Gained is Opportunity Lost


by raritee

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I can not even count (Yes, the number is more than I have fingers and toes!) the number of times I've seen people on the Neoboards proclaiming that they are:

a) Going to scratch an expensive scratchcard because they didn’t pay anything for it; or

b) Going to use an expensive avatar item that they got for a very low price before it inflated.

Fair enough for people to use these items if they actually want to and that had been their intention from the beginning. However, the fact that these users need to ask others whether they should use these items first indicates that inherently they know that it’s not as simple as it seems.

We’re going to take the Scratchcards as an example.

So you take a wander over to one of the Scratchcard Kiosk, you pay the amount that the greedy Kiosk attendant requests. Are these games rigged? Wait, I’m getting off track here. So where were we? Right. So you’ve handed over your hard-earned neopoints and being the very pwning person that you are you’ve picked up one of the more expensive of the Scratchcards you can get – yay!

What do you do now? Do you:

a) Sell it and make a profit; all your friends will be jealous;

b) Scratch it; you’ve always been a gambling fiend;

c) Ask complete strangers whether you should scratch or sell and ultimately decide to scratch it on the basis that you only paid the Kiosk price for it.

Honestly, option c concerns me. Scratching it because you love to gamble is your choice. (NOTE: I don’t promote gambling and I even refused to take bribes from the Kiosk attendants prior to writing this article when they requested that I do so.) Selling it to make a profit so you can gloat sounds like an intelligent thing to do – statistically you’re probably better off anyways. But scratching it because you only paid the Kiosk price, hmmm, we’re going to have a problem here.

Sit down, gather around and let me explain to you a small principle known as opportunity cost. I’m going to try and simplify it for you too; aren’t I the greatest?

So, simply put, whenever you have a choice to make, whenever you do anything you fail to do something that you could have been doing instead. When you choose to scratch a scratchcard rather than sell it you lose the opportunity to sell the scratchcard. Simple.

But what did the lost opportunity cost?

That’s simple too, the lost opportunity cost whatever you would have had if you’d done the alternative. In the case of scratchcards the cost of the opportunity lost is the profit that you would have made if you had sold the card.

Ohh, see? That card didn’t REALLY cost you ONLY the neopoints you paid the Kiosk attendant because you’ve also lost the opportunity to make the profit!

For those wondering, it does work the other way around; you DO lose an opportunity when you sell the scratchcard too. That’s why I said, “whenever you do ANYTHING you fail to do something.”

So, you decide to sell, you lose the opportunity to scratch the scratchcard. What’s the opportunity worth? This is a bit more difficult. You lose the enjoyment or the thrill of being able to gamble the cost of the scratchcard (then again, maybe some people enjoy selling items too?) and you also lose the percentage chance, whether it be 1 in 100 or 1 in 10 or whatever it is, that you could win something from the scratchcard worth more than you paid for the scratchcard. Interesting. This is where either a thrill seeker or a statistical mind will begin to show. A thrill seeker will value the opportunity to gamble highly and hence may consider the value of that to be greater (even if they don’t win!) than the neopoints that could be obtained by selling. It would be silly to assume that a thrill seeker would have to ask others if they should scratch the card, they would just do it. A statistical mind on the other hand can go one of two ways; a statistical mind may determine, for example:

1) If there is a 1 in 10 chance of winning 500k and the scratchcard can be sold for 100k, the scratch wouldn’t be worth it! Statistically they may have to scratch 10 cards at 100k each totaling 1 million neopoints, which is more than what they could ultimately win! A loss in real neopoints and opportunity cost is being made here.

2) If there is a 1 in 10 chance of winning 500k and the scratchcard can be sold for 1k, the scratch would be worth it! Statistically they may have to scratch 10 cards, costing 10k in total, which is less than what they could win! A profit in real neopoints is being made here.

See? So simply saying you’re going to scratch a scratchcard because you only paid the Kiosk price for it is silly. You… are… still… losing… the… profit… you… could… make… from… it. Ultimately, you’re paying exactly the same price (albeit not in pure neopoints but in opportunities lost) as anyone else who would be buying the scratchcards at full market price to scratch.

This happens with EVERYTHING! You know the saying, “There’s no such thing as a free meal?” That applies here in Neopia!

You go to the Omelette everyday to get some free food for your pet. Is it really free? No. If you feed it to your pet, you lose the opportunity to sell it.

You go to the Giant Jelly, exactly the same principle as for the Omelette.

You go to the Tombola, you win – exactly the same principle! If you use the items you lose the opportunity to sell them, which means they’re essentially costing you, one way or another, their market value.

It… happens… with… everything….

Can you see I think way too much about my transactions in Neopia? That being said, I’ve discovered that there may be a method to the madness of all the users who preach using the Neolodge instead of having to actually feed their pets.

Don’t get me wrong, the Neolodge is still going to cost you, but if you place your pet in Cockroach Towers at 5 neopoints a night for 28 days it’ll cost you 140 neopoints in total. Your pet doesn’t need any of the additional services; in fact, spoilt pets become brats so you’ll be doing all of Neopia a service. Maybe you don’t like the idea of putting your pet somewhere where there’s Cockroaches? Don’t worry, they’ll manage and besides, Cockroaches have plenty of protein, mmmmm. *drool*

Where was I? Right. So you’ve got 28 days where you don’t have to feed your pet; there’s a gain in opportunity here because when you don’t have to be feeding you can be off playing games or restocking (you know, something productive?). In addition, you’re still probably collecting your Omelette and Jelly. Sell them! You can sell Omelettes for about 8 neopoints and Jelly for about 2 neopoints. Do you see where I’m going with this? That’s 10 neopoints per day for 28 days and you’re only paying 140 neopoints, for a profit of 140 neopoints plus whatever you’re making in that time being productive! See? Taking into account opportunity costs can help you make a profit if you structure your finances and transactions correctly!

You could, however, just let your pet starve, but that would be bad, very bad. You should always care for your pets.

There’s an opportunity cost to using avatar items that you purchased cheap, too. Do you sell the item or use it? I’ll let you think about that, although it should be evident to anyone who has spent more than 5 seconds on the Avatar Chat that some people value avatars VERY highly.

There… is… an… opportunity… cost… with… everything… in… Neopia! Oh, except maybe at the Soup Kitchen but that's because the Soup Faerie got an F in Economics when she was in school.

 
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