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?