Question

Amazon offers you a chance to pay $1000 to be part of their pilot launch of their Smart contact lenses which integrate your eyes and smartphone via Bluetooth. Amazon is concerned with competitors getting their hands on their proprietary information so they put a clause in the contract that you may not resell the contact lenses and must use them until they’ve fully deteriorated. Is your opportunity cost for joining the program higher now that you can’t resell it? (Hint: imagine if the resell value was higher than the initial buy-in)

Answer 1

With the additional clause in the contract forbidding the client from reselling the contact lenses, the opportunity cost for joining the program gets higher. This is because, the resell value of the lenses can be much more than the initial amount spent, i.e., $1000. In case where the client is does not find the product desirable they won't be able to resell it and would be at loss. Similarly, in case of a higher resell price, the client fails to reap profits of selling the product at a higher price. Hence, in a scenario with the resell price being higher than the original price the client has a higher opportunity cost.