When it's worth driving across town for a deal

Tom Vanderbilt of How We Drive picks up on a Thaler classic from mental accounting. People irrationally say they will drive across town to save $5 on a lousy $10 calculator, but won’t do the same for $5 off a nice $125 jacket. Vanderbilt says his car’s navigation system shows him real time prices at nearby gas stations, allowing him to rationally calculate when it’s worth driving across town or even down the street for a better deal.

Interestingly, there was a 36 cents a gallon difference between the closest station and one an additional .3 miles away. So, on a 11 gallon fill-up, i could save nearly $4, with a minimal amount of driving. Doesn’t seem so irrational…But the next three stations, all located near each other, were charging the same price. I’ve actually used that more expensive station before, for the odd reason that there’s hardly ever a line (perhaps precisely because it’s more expensive). But I’ll be curious to see what long-term effects will be on gas-station pricing transparency as more drivers have these devices; will prices flatten out, or will there be more volatility as individual stations advertise particular deals, luring drivers who wouldn’t have considered those stations before?


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