So . . . yesterday I was asked to comment for a story in the local paper on gas prices. And, because I have become accustomed to my mental spewings having a greater share of the article on the web (thanks to this blog!), I thought I'd expand. Gas prices not only give me an opportunity to study my first research love, dynamic pricing (maybe I'll discuss that another day) but give a view into how consumers respond to ever-changing prices and stimuli. And we aren't very good in our responses. More gassy emissions after the jump.
Usually when we want to regulate our behaviour, we take steps in advance to frame our decisions in a certain way. For example, if we know that the Cool Ranch Doritos are extremely hard to resist when they are in the pantry, we don't buy them in the store. That's the easier decision to make, because we often are not craving chips when we're in the store. Another example: if we don't want to be caught by surprise by a high airfare, we begin planning a vacation early, thereby giving us lower earlier fares as well as more flexibility should the rate be too high.
When it comes to gas prices, we seem to fail to do any of these things. When purchasing a car, we may always look at gas mileage, but how much of an impact does it really have? It tends to be only one of many considerations in buying a car. So if we want a truck-class SUV, we may look for the most fuel-efficient one and forget we're buying a gas guzzler regardless of our choice. Or we may specifically want a smaller car that's efficient on fuel; again, there is little benefit on comparing individual-model fuel efficiencies once the type of car is chosen. It's rare that we're deciding between an Escalade and a Prius.
Then, once we're driving, we tend not to regulate. If we were seriously concerned with fuel prices, we would always check the signs (it's not like gas prices are hard to find), regardless of how much fuel was in our tank. This is our advance regulation - we can ensure lower prices by taking advantage of them when they occur. Instead, we usually wait until the tank is only one-eighth full or less, and then we're stuck; we have to buy regardless of the price.
There are two counterpoints to this, however. The first is the magnitude (or lack thereof) of gas price changes. Occasionally there is a jump (like when Katrina hit or the HST came in) but usually it's a difference of a few cents. A three-cent rise (fairly large from one day to the next) means that to fill my 50-liter tank I pay an additional $1.50. So while we may be acutely aware of prices when we pay them, the economic penalty of a higher price is usually not that material.
Second, we have to factor in the value of time. If I fill my tank four times as often because I'm taking advange of lower prices, I'm using more of my time. Assume it takes about 10 minutes to fill up from the time you pull into the gas station. That means that my four-fold filling wastes half an hour compared to someone who lets the tank run down. If I'm only saving about $5 (and probably not even that much), I'm valuing my time at $10 per hour, which was fine when I was working slinging popcorn in a movie theatre, but not so great now.
But I don't think it's regulation or the valuing of time (which we're actually pretty bad at in most circumstances). I think we are a) just lazy and lack forethought, so we wait until the last minute to fill up and b) a species that likes to complain. I remember when working at the aforementioned movie theatre, every time the price went up (sometimes by 20% or more), everyone would complain, but the higher price didn't hurt ticket sales. And that's what it comes down to - if you are truly dissatisfied with a price, you have to let the company know the only way they care about - by not buying.
Now let's go eat some Doritos and get gas!
No comments:
Post a Comment