September 22, 2016

The Urge to Waste Money on Luxury Gas

SMITH BRAIN TRUST — U.S. motorists wasted $2 billion in 2015 on premium gasoline that did nothing to improve vehicle performance, a new AAA study shows. Despite the fancy-sounding name, "high-octane" fuel only makes a difference in cars designed for it — which isn’t your Kia Forte. Marketing professor Yajin Wang at the University of Maryland's Robert H. Smith School of Business understands the urge to pay 50 cents more per gallon without getting any objective value in return.

Pumping premium gas into your vehicle isn’t conspicuous like wearing a flashy Rolex or carrying a designer Prada bag. Nobody oohs and aahs when they see you cruising in high-octane style. But Wang, who studies the psychological effects of luxury consumption, says that doesn’t necessarily matter. "The indulgent experience is not just for other people to see," she says. "There are intrinsic motivations for why people consume expensive or luxury items."

For starters, people feel happier and more self-satisfied when they indulge in luxury products. They feel sexier when they wear Victoria’s Secret cosmetics and more athletic when they wear Nike shoes. "Consumers rely on labels as cues," Wang says. "So they might perceive stronger engine performance when they use premium gas."

Sometimes the effect is more than imaginary. Wang cites a University of Minnesota study, which shows that test takers with MIT-branded pens earn higher math scores than control groups with regular pens. (The research is unclear if car engines get psyched up in the same way.)

In the end many motorists don’t understand the inner workings of combustible engines, but they pay more for premium gas just in case it makes a difference. Parents do the same thing when they buy organic milk for their babies. "Many people feel attached to their cars," Wang says. "They give names to their cars and want to pamper their cars."



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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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