Encyclopedia of Operations Research and Management Science

2013 Edition
| Editors: Saul I. Gass, Michael C. Fu

Opportunity Cost

Reference work entry
DOI: https://doi.org/10.1007/978-1-4419-1153-7_200545

The cost associated with forgoing an opportunity; the money or other value sacrificed by choosing a nonoptimal course of action. In linear programming, the opportunity cost is the reduced cost of a variable not in the optimal basic solution. If a unit of a nonbasic variable is introduced into the solution, the optimal value of the objective function would decrease by an amount equal to the associated reduced cost.

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