The MPG Illusion

Couple days ago I came across an interesting video on YouTube called “The MPG Illusion” by Duke University-Fuqua School of Business. Rick Larrick and Jack Soll in the video posed an interesting question: Will it be better to upgrade a car from 10mpg to 20mpg than 25mpg to 50mpg? Most people will answer no. Most people assume there is a linear improvement in mpg, the bigger the improvement the better. However, with some simple math tells us otherwise.

(The researcher: Rick Larrick and Jack Soll also post a news release on Duke's Fuqua Business web)

Over a distance of 100miles, 10 gallons of gas will be used by a 10mpg car will use, 5 gallons for a 20mpg car, 4 gallons for a 25mpg car, 2 gallons for a 50mpg car. Hence, upgrading a 10mpg car to 20mpg car will save 5 gallons of gas every 100miles, versus 2 gallons for the other situation. If we plot this problem into a graph as below, we can see there is a diminishing return on gas usage as the mpg increases. Though another question arises: Is it worth it to switch your old car to a new more fuel efficient one?