# The Opportunity Cost of a Free Concert Ticket

According to Wikipedia, Opportunity Cost is "the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen)." Metafilter discusses an opportunity cost question that stumps far too many economics students.
Answer this: "You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost \$40. On any given day, you would be willing to pay up to \$50 to see Dylan (because he's so cool!). Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? A. \$0 B. \$10 C. \$40 D. \$50"

See if you can determine the correct answer before you look it up. There are links to more information in the form of pdfs, and a discussion in the comments. The problem seems to raise more questions that it answers. Link

My problem with this question is that it didn't mention whether "you" liked Eric Clapton or not, therefore many Mefites declared that the Clapton concert was moot, and you may as well have supposed the first activity would be to stay home and watch TV or something.

Also, my experience tells me that concert tickets with no resale value are still valuable, because there is value in giving it away. People like that sort of thing.
Abusive comment hidden. (Show it anyway.)
The question DOES state that Clapton is your next-best alternative activity, which indicates that there is nothing you would rather do than see Clapton. So, using that part of the question, you wouldn't want to give away your ticket. And, because it has no resale value, it is worthless any other way if you don't go. So, the question appears to be valid to me.

Opportunity cost is not to be confused with value. In my brief reading of the paper, it seems like that is where people got tripped up. Still, it is disturbing to me that so many educated economists got the question wrong.
Abusive comment hidden. (Show it anyway.)
Aha, so "next-best-alternative" means that you like Clapton better than Dylan -but is that only slightly better, a lot better, or is it only "better" because you have a free ticket? I have to admit, I didn't read ALL the links all the way through.
Abusive comment hidden. (Show it anyway.)
I agree that it's an important factor to know what the Clapton concert is worth to the recipient. That contingency will be used to determine choices made.

Having been a student of economics, I was fascinated to learn the theory behind making choices. Every choice we make uses economic logic. Although people don't measure all choices in terms of currency, people will make their choices based on value. If the decision making process is stretched out to absurdity, every choice takes into account all possible outcomes as well as their costs and benefits. The human mind can generally do this very quickly and that's really neat. Going to see Clapton might be worth it until considering ancillary factors, like providing it to someone else and getting the "warm fuzzy" feeling like you mentioned.

This made for good food for thought on a Monday morning. Thanks for that.
Abusive comment hidden. (Show it anyway.)
I gave up paying for concerts when tickets for The Eagles went up to \$8 -back in the mid 70s. After that I got lots of free tickets as a radio DJ, but as I got older, all concerts seem like more trouble than they are worth. Now, my kids are amazed that I got to see so many rock concerts that they cannot afford.
Abusive comment hidden. (Show it anyway.)
Commenting is closed.

Email This Post to a Friend
"The Opportunity Cost of a Free Concert Ticket"

Separate multiple emails with a comma. Limit 5.

Success! Your email has been sent!

close window
X