Inspired by debates they had while carpooling in a hybrid car, management professors Richard Larrick and Jack Soll ran a series of experiments showing that the current standard, miles per gallon or mpg, leads consumers to believe that fuel consumption is reduced at an even rate as efficiency improves. People presented with a series of car choices in which fuel efficiency was defined in miles per gallon were not able to easily identify the choice that would result in the greatest gains in fuel efficiency.
For example, most people ranked an improvement from 34 to 50 mpg as saving more gas over 10,000 miles than an improvement from 18 to 28 mpg, even though the latter saves twice as much gas. (Going from 34 to 50 mpg saves 94 gallons; but from 18 to 28 mpg saves 198 gallons).
Here’s something to think about when you buy your next car. A difference in fuel efficiency between a 10 mpg SUV and a 20 mpg SUV will save 500 gallons of gas per 10,000 miles driven (more than $2000 by current prices). By contrast, the difference between a 35 mpg sedan and a 50 mpg hybrid only saves 86 gallons per 10,000 miles (around $400 by current prices). Consider that the next time you contemplate the sticker price difference; I know I will.