Books on the imperfect psychology of financial decision-making are popular these days. In works like Predictably Irrational, we hear story after story about how people make bad decisions, generally along the lines of being penny wise and pound foolish.
What do you think about the following situation? With gas prices heading ever upward, web sites like GasBuddy.com have become popular. Drawing on the contributions of readers, GasBuddy will show you a nifty map of where the cheapest gas is near you. Assuming you don’t take big detours to do so, you can save money by consistently patronizing the cheapest stations. But here’s the thing: the money you save is only the difference between the best and worst price. So while your change in behavior, a change triggered by high prices, may genuinely save you money, it can’t save you any more money than it would have when the prices were low.
In other words, you could have saved that same money last year, but (relatively speaking) you weren’t pissed off about it then.
Is that irrational behavior or not?
Rambles Blog at Star Chamber 
It is exactly irrational.
Lets say you can save $0.10 per gallon by shopping around, regardless of the ‘base price’. If gas were a dollar a gallon, you are saving 10%, at two dollars a gallon, you are saving 5%, at four dollars a gallon, you are saving 2.5%. The percentage saving should not matter, just the absolute savings, which has not changed with price.
It might be a case where people were not aware of the price of gas until now, but they will continue to frequent cheaper gas places not that they have gotten on the radar.
Doug
Moreover, the value of the dollar has dropped since last year, so saving fifty cents on a fill-up today is worth less than saving fifty cents on a fill-up a year ago.
I’m frequently annoyed that experimental economists are so quick to harp on the supposed irrationality of human behavior. They often remove the behavior from a larger context. For instance, it may be “irrational” to put on your seatbelt if you’re just moving the car fifteen feet up the driveway. On the other hand, given the balky nature of human memory, it’s probably just as well to train yourself to put your seatbelt on every single time you sit in a car. Otherwise, you’ll get sloppy and then BANG!
In the context of purchasing gas, being conscious of where to find the lowest price is part of an overall behavior change in which you also keep your tires inflated and start shopping around for a car with better mileage. I can make you look silly by zooming in too close to any given aspect, but overall it may be a reasonably healthy response.
I’m glad you brought up tire pressue: I doubt people are paying much more attention to their tires and their speed (driving slower saves gas too) as they are to where the cheap gas is. I think our culture encourages shopping, but not maintenance, so with three options for saving money on gas, one is the clear favorite: shopping for the cheapest spot.
I’ve gone the driving slower route; while I can’t justify saving 5 cents a gallon on a twelve gallon fill, I can justify dropping my speed 10 mph during the commute to reduce my demand. As an aside, I had a long e-mail correspondence recently with a MadSci patron who insisted that the faster you drive the less time it takes, therfore the less gas. He would not be swayed by my presentations of data from several sources, and I think many of the other drivers I commute with share his reasoning.
There another way to look at this behavior which is less irrational:
Say you are paying $5.00 per gallon instead of $3.00/gallon and fill your 10 gallon tank weekly.
Your weekly fill-up has gone from $30/week to $50/week, so you have $20 less per week in disposable income. If you find a place at $4.75 a gallon, you have only $17.50 less in disposable income. If you find small ways of economizing like this, you may recover the entire amount due to the increase in gas prices. So if you look at it as total available disposable income, it is a savings, and therefore quite rational behavior.
Right. You can talk about percentages all day long, but a lot hinges on where the absolute numbers cross certain thresholds. For instance, you can’t drive a car that’s been repossessed.