Shadow Price
Version 1.0.0 · Updated 2026-07-30
CORE DEFINITION
When a resource (such as time or carbon emission allowances) has no market price, the 'true economic value' or 'opportunity cost' is artificially estimated for decision-making. That is, the marginal benefit that can be obtained by relaxing the resource constraint.
SCAFFOLDING EFFECT
Reduce cognitive load
Make hidden costs explicit. Although your time is not priced, if wasting an hour causes you to earn 500 less, the shadow price of your time is 500. Using shadow prices to calculate the cost of 'queuing' or 'traffic jams' makes decisions more rational.
Anchor fast decisions
Shadow price refers to the 'true economic value' or opportunity cost artificially estimated for decision-making when a resource (such as time or carbon allowances) has no market price, i.e., the marginal benefit of relaxing the constraint by one unit of the resource.
MINIMUM ACTION
In progress 0/4Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Shadow_priceverified
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