When Time Is Money: Decision Behavior under Opportunity-Cost Time Pressure

Decison-making dilemmas can arise because errors may result either from deciding too soon or from delaying decisions too long. Delay can result in lost opportunities or reductions in payoffs from the most accurate decision. This paper investigates decision processes in environments where there is time stress due to the opportunity cost of delaying decisions. First, using computer simulation, the relative accuracy of alternative decision strategies is examined in environments that differ in terms of the levels of opportunity cost of delay. The lexicographic choice rule is shown to be a very attractive decision process in situations where there is opportunity-cost time pressure. Two experiments test the adaptivity of actual decision behavior to the presence or absence of opportunity-cost time pressure along with variations in goals (accuracy emphasized vs. effort savings emphasized), dispersion in probabilities or weights across the outcomes of the choice options, and the degree of correlation among the outcomes. Subjects were generally adaptive to opportunity-cost time pressure. However, failures in adaptivity were identified when choice environment properties with conflicting implications for adaptation were present simultaneously. In particular, under opportunity-cost time pressure, subjects received a lower expected payoff when the goal was to emphasize choice accuracy than when the goal was to emphasize savings in effort. The question of when adaptivity in decision making might fail is discussed.