Tag Archives: economic valuation

This article describes the mango pulp weevil (MPW), Sternochetus frigidus, introduced to Palawan province and discovered in 1987. The weevil still lingers as a pest control problem that prevents local mango farmers from exporting their agricultural produce in other places. Find out how the MPW looks like and where it grows. A video is included to show how this pest behaves when disturbed and how fast it can move.

Research still has to find a long-term remedy to the problem of mango pulp weevil (Sternochetus frigidus) infestation in the province of Palawan in the Philippines where the world-renowned underground river is found. Pest control approaches by farmers have so far been unable to eradicate the pest at source which finds the edible fleshy part of the mango as its favorite breeding place. Hence, the name mango pulp weevil or MPW.

The weevil damages a part of the mango pulp thus reduce the quality of the fruit. For more than two decades, mango growers were unable to export their agricultural produce because the mango pulp weevil will threaten the mango industry in other places.

A post-harvest pest control approach done so far to control the mango pulp weevil include irradiation as quarantine treatment (Padilla 2012). This approach appears to be more economical compared to other post-harvest pest control treatments such as the application of heat and fumigation. Local farmers also apply hit-and-miss approaches to control the weevil at source.

Morphology of the Mango Pulp Weevil

How do these pests look like? Below are pictures of the mango pulp weevil.

These are two of the four MPWs I have found yesterday upon slicing several fruits from our homegrown mango trees. I can feel that they have a hard texture as I turn them around for the right angles to take photos. The insect is quite small (6mm x 4mm) but switching my Panasonic Lumix LX5 to macro mode enabled me to take extreme close up shots at a distance of less than one centimeter.

Overall, MPWs have dominant brown color at the underside and an orange dorsal region mottled with dark, charcoal black bands across the pitted wings. Also, the wings have rough tiny keratinous projections that probably aid them in burrowing through the soft pulp upon maturity. The long snout has two antenna with rounded tips.

Behavior of the Mango Pulp Weevil

The two samples in the pictures shown previously were found in just one mango fruit, occupying about two centimeters of the pulp next to the seed. Initially, I thought there was only one but upon closer look, another weevil with neatly folded legs sprang to life after a minute or two.

Below is a video of how fast these pests could walk about. If given the chance, they will fly within a few minutes and enter into a state of suspended animation or diapause. Weevils do not fly great distances but usually stay close to the parent tree until the next fruiting season (Gove et al. 2007).

Consumers in Palawan can still eat at least half of the mangoes because only one side of the fruit is affected. An alternative way of consuming infested fruits is to flesh out the mango pulp and dry it (dried mangoes). The affected area is normally about 3 cm in diameter.

Preventive Measures to Control the Pest

I have not been so keen before on the presence of the mango pulp weevil in the three mango trees we have in our yard. My friend, a City Agriculturist, remarked that I should do something about the mango fruits that fall when ripe as this will infect other healthy mango trees.

Based on her remark and on the readings I made in writing this article, I recommend that the following measures should be made by consumers or mango owners.

Harvest mango fruits as soon as these are mature.
Remove all fallen fruits and destroy pests in infested fruit. Damaged fruits should be buried at least half a meter below the ground to prevent the weevil from completing its life cycle (Catindig and Heong 2005).
Kill the pest right away when found in mango consumed.
Report to authorities illegal shipments of mango from infested sources.
Undertake indigenous ways to control weevil infestation such as natural fumigation or bagging using newspapers or similar material.

For researchers, studying local farmers’ practices in controlling mango pulp weevil infestation can help minimize costs associated with pest control specifically the use of synthetic pesticides. Comparing the efficacy of such practices will help identify low-cost techniques or approaches that will reduce, if not eradicate the mango pulp weevil problem.

Natural pest control measures such as breeding ants that feed on the mango weevil (Renkang and Christian 2007) may also be explored. Are there ants species in Palawan that can qualify as weevil predators? This ecosystem approach, particularly looking at the food web interactions, may be the more viable pest control option.

Is Banning Mango Export the Answer?

While banning the exportation of mango fruits from Palawan will prevent pest outbreak in other places, this caused a great loss to mango farmers in the province. Other efficient ways to control the pest must be considered or its economic impact be examined further.

Moreover, despite the infestation, it seems that only a small percentage of the mango fruits are affected. Without pesticide use, out of 300 mangoes that we have harvested at home, we found only less than 10 fruits with MPW in it. That’s only three percent.

An economic analysis may be done to look at the actual damage caused by this pest. Banning fruit exportation may not really be the answer. Rather, an effective quarantine measure should be applied.

References

Catindig, J. L. A. and K. L. Heong, 2005. Description of mango pulp weevil. Retrieved on May 27, 2014 from http://www.niaes.affrc.go.jp/techdoc/apasd/Sternochetus%20frigidus%20-B.html

Gove, T.; Joubert; J. P.; and M. S. de Beer; 2007. Literature review on mango seed weevil Sternochetus mangiferae (Fabricius) (Coleoptera: Curculionidae). SA Mango Growers’ Association Research Journal 27, 21-28.

Padilla, L. D. E., 2012. Saving the Phl Super Mango export industry from pulp weevil infestation through irradiation. Retrieved on May 27, 2014 from http://www.bar.gov.ph/digest-home/digest-archives/365-2012-1st-quarter/2055-janmar2012-phl-super-mango-export-industry

RenKang, P. and K. Christian, 2007. The effect of the weaver ant, Oecophylla smaragdina (Hymenoptera: Formicidae), on the mango seed weevil, Sternochetus mangiferae (Coleoptera: Curculionidae), in mango orchards in the Northern Territory of Australia. International Journal of Pest Management, 53(1):15-24.

Environmental Economics, Environmental Issues, Research

The Relationship Between Bribery and the Environment

September 12, 2013 Regoniel, Patrick A. Leave a comment

Bribery can lead to environmental degradation. What are the evidences? Are there solutions to this age-old corrupt practice? This article explores these issues.

The recent spate of corruption highlighting a businesswoman allegedly bribing government officials to channel billions in taxpayers money to fly-by-night or bogus non-government organizations prompted me to write this article. Since my concern is largely on the environmental implications of events like this, I reviewed literature on how corruption, specifically bribery, relates to the environment.

Bribery and the Environment

Considering that governance becomes the prime focus of analysis when corruption issues arise, this discussion will examine undesirable practices, specifically offering of incentives to public officials in view of exempting them from the rule of law or pocketing taxpayers money for their own selfish purposes. Bribery occurs at different levels of government, that is, from the highest administrative or lawmaking bodies to operational levels charged with law enforcement responsibilities.

A brief review of reports on the relationship between bribery at different levels of government and the environment yielded the following summaries and conclusions:

1. Bribery of law enforcers leads to low compliance among violators thus pressure to natural resources.

Sundström’s study[1] in South Africa revealed that law enforcers’ acceptance of bribes from small-scale fishers who commit illegal fishing such as poaching decrease their trustworthiness. As a result, fishers tended to exploit their natural marine resources more than what it can sustain. Overfishing upsets the balance of the marine food chain such that the population of target fishes decline and sizes of fish caught by fishermen get smaller through time.

2. Ineffective regulatory systems results to pollution.

Environmental inspections as a regulatory system serve to deter non-compliance with rules and regulations set forth for approval of environmentally critical projects. Once those tasked to do such inspections receive money in exchange for favorable reports on the project’s environmental performance despite exceeding permissible emission levels, pollution results. The effects of pollution may be immediate (acute) or long-term (chronic) depending on the nature of the pollutant.

For example, if a mining project does not have adequate leachate treatment facilities as a result of non-compliance to required mitigating measures, high concentrations of heavy metals will be discharged into waterways. This will disrupt the normal biological processes in aquatic ecosystems where various organisms including man derive sustenance.

3. Environmentally harmful policies are formulated such that disasters occur.

When unscrupulous individuals bribe lawmakers to craft policies towards their favor, environmentally harmful policies result. For example, if the government allows logging in highly elevated or watershed areas, lack of trees to cushion the impact of heavy rains result to flooding of low-lying villages. This will mean loss of lives and property aside from loss of important ecological goods and services.

4. Unfair allocation of environmental resources lead to further environmental degradation.

If high-ranking officials accept bribes to allow large commercial fishing companies to fish in municipal waters, unfair allocation of marine resources occur. As small fishers do not have the means to compete with the efficient, mechanized fishing equipment of large-scale fishers, they will resort to illegal means that further degrade the environment. One of them is the use of dynamite in fishing wherein large areas of productive reef are destroyed. The attitude that prevails is “Well take them (the fish), before they (the large-scale fishers) do.” thief

What has been done so far to curb bribery?

Acceptance of bribes shows the vulnerability of those tasked to govern and enforce the rules and regulations of a country. Many solutions have been suggested, recommended and enforced including reforms to improve transparency and accountability, legislation to reduce flaws in existing laws, reducing the discretionary powers of public officials, greater awareness among the people, involving citizens in government affairs, and so on and so forth.[2] However, despite these measures, corruption persists in many countries.

The Economic Solution

Based on the resource allocation point of view, the practice of bribery continues because it offers those involved to get more than enough resources to satisfy their wants. The one giving the bribe and the one receiving the bribe both benefit from their transaction but third parties suffer. The negative environmental impacts then are externalities of these transactions. There is a need, therefore, to integrate the externality of environmental degradation as a result of bribery.

In view of developing a research concept using the economic solution of internalizing externalities, economic valuation may be used as an approach to determine if there is a relationship between the amount of bribe and the cost of environmental degradation. Thus, the following questions may be asked:

Is there a relationship between the amount of bribe and the corresponding cost of environmental degradation?
How much environmental degradation occurs for a certain amount of bribe?

For the benefits gained by both the briber and the bribed (my own terms for brevity), monetary incentives to disadvantaged parties can offset the negative effects of environmental degradation. The point is, the guilty parties should be made to pay for the consequences of their actions. Penalties should be proportionate to achieve environmental justice.

Environmental justice is defined by the US Environmental Protection Agency as “the fair treatment and meaningful involvement of all people regardless of race, color, sex, national origin, or income with respect to the development, implementation and enforcement of environmental laws, regulations, and policies.” This means fair allocation of natural resources to everyone should be pursued in a democratic society.

Reference

1. Sundström, A. (2013). Corruption in the commons: Why bribery hampers enforcement of environmental regulations in South African fisheries. International Journal of the Commons, 7(2). Retrieved from http://www.thecommonsjournal.org/index.php/ijc/article/download/370/360

2. Winbourne, S. (2002). Corruption and the environment. Retrieved September 11, 2013, from http://pdf.usaid.gov/pdf_docs/PNACT876.pdf

Environmental Economics, Environmental Issues

List of Negative and Positive Externalities of Oil Spill

August 30, 2013 Regoniel, Patrick A. Leave a comment

Many people view oil spills as grossly disadvantageous to everyone. In reality, there are benefits gained by some sectors from disasters like this. Read and find out how could this be so.

There was a lot of concern about wasted lives and property due to the collision of a cargo vessel and a passenger ferry last August 16, 2013 in Cebu in central Philippines. Aside from lost lives due to the accident, there were also concerns on the ill-effects of oil leaked into the environment. The sunken passenger ferry spilled thousands of liters of diesel and bunker oil that affected around 5,000 hectares of nearby coastal areas[1].

The oil spill in Cebu, although locally significant, pales in comparison to major oil spill disasters in human history. Among those that gained worldwide attention were the oil leaks due to a ruptured well in the Timor Sea in 2009 and a similar incident in the Gulf of Mexico in 2010. The latter one is considered the worst US environment disaster, second worldwide to the intentional oil spill during the gulf war in 1991[4].

Externality: Cost and Benefit of Oil Spill

These oil spills have both negative and positive externalities. An externality is a cost (negative effect) or benefit (positive effect) to a third-party as a result of an activity, transaction, or event like the oil spill. The third-party is originally not a part of the transaction, activity or event.

Oil spills are usually perceived negatively owing to the overwhelming impact to the environment and people’s livelihood especially those who are natural resource dependent. But viewing it more objectively, benefits accrue to other parties as it opens new opportunities to some sectors. While companies responsible for the disaster incurred millions of dollars to contain the spill and make reparations, benefits accrued to those tasked to do the clean-up, support services, and associated activities.

Here are lists of positive and negative externalities based on reports about the oil spill in Cebu[1], Timor Sea[2][3], and the Gulf of Mexico[4][5].

Negative Externalities of Oil Spill

Fishing opportunities for thousands of fisherfolk lost due to mangrove contamination
Reduced marine productivity due to disruption of the food chain
Opportunity cost due to government dispatch of ships and aircraft to conduct clean-up operations
Loss of marine and coastal wildlife (e.g. fish, birds, turtles, sea snakes, mammals)
Loss of tourism revenue (affects surfers, beach goers, sports fishing, SCUBA diving)
Loss of ecological function of marshlands and mud flats
Lost income for tourism industries
Decline in aquaculture production (e.g. seaweed farms, fish cages, shellfish beds)
Oil price hike due to lost oil production
Health costs for those engaged in clean-up operations

Positive Externalities of Oil Spill

Research opportunity – universities dispatched research ship to collect samples and analyze toxicity of water; monitoring project
Containment technology development – improved devices or techniques to contain oil spills in extremely high pressures underwater
Local materials development to contain oil spills (e.g. coconut husks, sawdust, chicken feathers, and hair)
Increased profit from sale of dispersants and chemical compounds that break the oil into smaller molecules
Work for thousands of workers addressing the spill
Income from treatment and storage of retrieved oil
Consultancies for oil spill experts
Better oil field operation practices to prevent future disasters
Thousands of scoopers and respirators sold to the benefit of manufacturers
Income from rentals of portable toilets and bedrooms

Conclusion

While these lists of the negative and positive externalities of the oil spill are not exhaustive, these highlight the importance of viewing things objectively. These negative and positive externalities may be valued to see the overall impact of the disaster.

It must be pointed out, however, that the expected net benefits from oil spill will likely be negative because the effect of the oil spill to the environment can last for years. And the natural environment as life support systems is priceless.

References

1. Rappler. (2013, August 19). Oil spill: Cebu under state of calamity. Retrieved August 29, 2013, from http://www.rappler.com/nation/36787-oil-spill-cebu-under-state-of-calamity

2. Al Jazeera. (2009, October 30). Timor sea oil leak continues. Retrieved August 29, 2013, from http://www.aljazeera.com/news/asia-pacific/2009/10/200910307564274566.html

3. Arup, T. (2009, November 3). (2009, November 3). Mud to be used to stop oil rig fire today. In The Sydney Morning Herald. Retrieved August 29, 2013, from http://www.smh.com.au/environment/mud-to-be-used-to-stop-oil-rig-fire-today-20091102-htfp.html

4. Dell’Amore, C. (2010, May 13). Gulf oil leaks could gush for years. In National Geographic Daily News. Retrieved August 29, 2013, from http://news.nationalgeographic.com/news/2010/05/100513-science-environment-gulf-oil-spill-cap-leak/

5. BBC News. (2010, May 30). Gulf of Mexico oil leak ‘worst US environment disaster.’ Retrieved August 29, 2013, from http://www.bbc.co.uk/news/1019433

Environmental Economics, Environmental Issues, Research

Household Adaptation to Climate Change in the Philippines

June 30, 2013 Regoniel, Patrick A. Leave a comment

How do marginalized people living in vulnerable coastal communities adapt to the effects of climate change such as sea level rise? What is an example of this adaptation at the household level? The following article describes one of these interesting adaptations and its implications.

One of the interesting aspects of research is discovering something new. Although a phenomenon has been there for a long time, it becomes a relevant point of interest once its occurrence is viewed more keenly and becomes a subject of discussion.

Take for instance the cross-country research our group conducted last year in the coastal areas of the Philippines, Indonesia, and Vietnam to document the effects of climate change. One of those inquired in the investigation looked into the adaptation of marginalized fisherfolks to the hazards brought about by typhoon/flooding, coastal erosion and saltwater intrusion.

What I found interesting in this climate change study are the unique ways by which marginalized people try to cope up with changes in their environment. In this particular case that we studied, the fisherfolks’ adaptation to the erosive effects of waves in the gradually advancing seawater was investigated.

We visited three communities (locally called barangays) to find out if there are any signs of initiatives to mitigate the effects of sea level rise. There, indeed, are several interesting adaptations made by fishermen in the tropical regions such as the Philippines. I relate one below.

Household Adaptation to Sea Level Rise

Below is a picture of a household adaptation in response to rising sea levels that erodes the thin strip of land a few hundred meters wide. A series of temporary and permanent houses dot this habitable portion that lies between the sea and the concrete highway running along the irregular coastline.

I noticed this ingenious way to keep soil from eroding in the beach of Binduyan, a coastal community lying east of Puerto Princesa in the island of Palawan in the Philippines. It may be a common sight to the uninitiated, but to someone who does research this means a lot.

What were the costs involved?

If you will imagine the time, money (although these materials may have been sourced around) and effort devoted by the person to construct this structure, you will be able to appreciate the significance of this adaptation to the life of the builder. Since we are after economic analysis of household adaptations like this, questions like the following arise in my mind:

How many people were involved in constructing the makeshift seawall?
How much time did it take them to build such structure?
What opportunities did they lose as a consequence of working on the structure (see opportunity cost to understand how important this concept is)?
What benefits were gained?
Did the benefits justify the cost of construction or was it just a waste of time?

Why would this family go to lengths in constructing this makeshift structure made of local materials? It’s unfortunate nobody was there to ask when we passed through as we walked the beach and note down observations. The owners were out somewhere, probably fishing. But these questions helped us design our questionnaire as this visit was part of our scoping activity.

We measured the height of the whole structure. It is 1.2 meters in height! Did seawater rise that high? How many years did it take to reach that level? What is the distance of the water’s edge at high tide from this house since people living in the area took notice of the rising waters?

Questions Lead to Discovery and Informed Actions

Many questions arise as a result of this simple observation. And these questions will propel you to undertake research focused on your specific concern to contribute to the body of knowledge. That, of course, requires publishing your work for others to learn from. Research findings mean nothing if left unpublished.

You may download and read the results of the study I mentioned above from the WorldFish website. It is titled “Economic Analysis of Climate Change Adaptation Strategies in Selected Coastal Areas in Indonesia, Philippines and Vietnam.” It is hoped that the findings of this research will aid policy makers in coming up with actions to mitigate the effects of climate change thus reduce costly damage to vulnerable coastal communities.

Environmental Economics

Economic Valuation: What is Change in Income Technique?

January 31, 2013 Regoniel, Patrick A. Leave a comment

One of the interesting topics of environmental economics is economic valuation. What is economic valuation and how does it work? What is change in income technique? This article explains these concepts.

The Meaning of Economic Valuation

Economic valuation entails imputing monetary value to natural and environmental resources that were once regarded free. This is because everyone thought that natural and environmental resources are inexhaustible.

Background on the Rise of Environmental Economics

It was not until around the 1960s, during the height of the industrial revolution, when people realized that natural resources like clean air has value attached to it. Although air may be inexhaustible, its quality can be compromised. Polluted air is associated with various diseases of the respiratory system thus entail cost.

Air is consumed by everyone, and anything that is being consumed is a good. A good can be represented by money. But the amount of money that corresponds to, say, a liter of fresh air, is not easily determined. Unlike other goods found in the market, air is neither sold nor bought. But we know for sure that clean air is a valuable resource that, just like any resource that we consume, provides benefit to everyone. Clean air is one important good that man could not do without.

The air people consume (by inhaling it in their lungs and deriving oxygen to burn food hence release energy), just like any good, exists at various levels of quality. Air of good quality provides greater benefit to people than air of poor quality. Air of poor quality or polluted air can cause different kinds of illnesses. Thus, a good of excellent quality provides greater benefit to consumers than a good that is of inferior quality.

Why is it necessary to assign monetary value to clean air? The main purpose of assigning value is to be able to manage this important natural resource. Unless monetary value is given to it, people tend to undermine its importance as anyone could get it free. At best, the value of a consumed good like clean air can only be estimated. This can be done through indirect means.

In environmental economics, one of the tools used in valuing natural resources such as air is the change in income technique. How is this economic valuation tool used?

Change in income technique is discussed in greater detail below using air as an example to demonstrate how this valuation technique works.

Change in Income Technique

In today’s civilized cities, it is expected that some degree of air pollution exists. The value of the ambient air, therefore, lies within a range of air quality, i. e., clean air to highly polluted air. Correspondingly, clean air will be valued more by people than polluted air; but how much will that be? income

Since the value of clean air could not be directly measured, this can be valued indirectly by looking into the change in people’s income due to loss of work from ill health, premature illness or death resulting from polluted air. If the quality of air is improved, there will be improvement in health, illnesses are reduced or avoided, and premature death is prevented.

Therefore, the value of air improvement is equal to the difference in income between people living in a polluted air environment and in another location or state of better air quality. It is assumed that more income will be gained by people due to better health achieved in a locality with cleaner air. Cleaner air environment is associated with healthier people who are able to do more work, thus more income gained.

Use of the Valuation Technique: Comparing Costs and Benefits

How can the quality of air be improved so that people will gain more income?

This can be done by formulating and implementing pollution control regulations to limit, reduce or eliminate the source of pollution. But the implementation of pollution control regulations entail cost in terms of the personnel required to implement it, equipment to monitor emissions, advocacy through information and education campaign, among others.

If income increases after implementation of pollution control regulations, then it is now possible to compare the cost and the gains. A cost-benefit analysis can then be made. If benefit (B) in terms of increased income far outweigh the cost (C) of implementing pollution control regulations, then the cost of implementing pollution control regulations is justified.

These scenarios may be represented by the generalized equations of cost and benefit below.

1) B – C = 0 POLLUTION CONTROL REGULATION HAS NO EFFECT AT ALL

2) B – C > 0 POLLUTION CONTROL REGULATION IS EFFECTIVE

3) B – C < 0 POLLUTION CONTROL REGULATION IS NOT WORTH IT

It will be desirable to attain condition 2 but the outcome may depend on a given time frame of assessment. It is possible that either condition 1 and 3 may be that outcome during the early stage of implementation of pollution control regulation.

Change in income therefore is a useful economic valuation tool that can be used to measure the relative value of air quality. Its application is straightforward, although a strong link must be established between air quality and health and vice-versa.

Related Reading

What is the value of natural resources?

What is environmental economics?

Environmental Economics

Opportunity Cost and Decision Making Plus Examples

December 16, 2012 Regoniel, Patrick A. 1 Comment

What is opportunity cost? How can this economics concept become a useful tool in decision making? Read on to find out.

Opportunity cost is one of the important concepts I have learned in the course of teaching environmental economics. Understanding the concept has helped me a lot especially on those times when I need to make decisions or choices given a set of alternatives.

What is opportunity cost and how can knowledge and application of the opportunity cost concept become useful in decision making?

Opportunity Cost Defined and Example of a Decision Making Situation

Opportunity cost is simply the cost of the next best alternative presented to you during a decision situation. This can be more clearly illustrated by an example of a decision making situation below.

You might, for example, be given the opportunity to decide whether to take that long vacation you longed to take for many years. You find yourself well entrenched in the current work that you are in, where your decision will spell the future direction of your life. The question then is “Will you give up your current preoccupation because of your desire to have that restful respite from the hustle-bustle of work life?”

What is the opportunity cost once you make the decision in this case?

There will be a range of alternatives that will present itself to you. And these alternatives have their own set of advantages and disadvantages.

How will you know which of these is the next best option for you?

It will help if you will enumerate and rate the different alternatives based on your values, preference, or need/want. These values, preferences and needs are expected to vary across individuals; so someone faced with the same circumstance will decide differently from another person.

One way to make clear the value of these alternatives is the use of a decision technique that uses numbers. To sum it up, the technique just makes use of a scale of 1 to 10 where you rate each alternative according to your subjective evaluation of its value.

After rating all the alternatives, you can now choose which among those alternatives have the highest score; just by adding up all the advantages and disadvantages of each alternative. The alternative with the highest value is your next best alternative and is your opportunity cost.

Another Example of Opportunity Cost: What are you going to do with your $100?

Another much simpler example to demonstrate opportunity cost is the following situation.

You have $100 with you. Now, you would want to spend your $100 in a shopping mall in such a way that you will be able to enjoy it to its maximum utility, meaning, you want to make the most of it. You may have a range of choices like the ones given below, each one priced at $100.

a lunch with friends
an Android phone
your medicine for ashtma
a pair of branded shoes
a pair of glasses

Notice that given this range of choices, your values, preference or need will determine your decision. You might put premium to the camaraderie of your friends and you are willing to give up all the other choices. Once you decide to take lunch with friends as your best choice, you give up your opportunity to buy either an Android phone, your medicine for asthma, a pair of branded shoes, or a pair of glasses which you may likewise need or want. Any of these options will be your opportunity cost, but it is possible that in reality, some of the alternatives presented to you may not really be worth $100 to you.

The real opportunity cost, therefore, is the next best choice which you will mostly take if you did not pay for that first option. Once you give up your $100 for a certain item, you lose your chance to purchase any of the items with likewise similar value to you. What you gave up is your opportunity cost.

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