greed

Arbitrage and irrationality

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I recently drove into this scene: a gas station with cars lined-up 3-4 deep across the 28(!) pumps.

Assuming the next exit would have at least one competing option, I quickly moved along down the road. But found it curious that other drivers continued to queue rather than follow suit.

I wondered why, when it seemed so obvious to me, that other drivers at the end of the lines chose to waste time.

Maybe it was the sight of lines behind the filling stations that made drivers wonder if the gas was cheap at this station or scarce in the area? Or maybe they were simply not performing the mental calculus to ensure the economical use of their time

I chose to risk a loss of time rather than chance being fooled. In my opinion, the queuing drivers that stayed (unless their car was running on fumes) were, as it is called, married to their position.

Was I right to “waste more time” traveling to the next exit to potentially wait even longer?

The time costs for staying or moving-on show the expected wait at a pump behind 3-4 cars is longer than trying at least one other station. The only risk is in the time it takes to investigate if the crowd was an inconvenient anomaly. It makes no rational sense for all but the most needy drivers to queue and not try their luck elsewhere.

How many cars would it take for the collective mental accounting to push the irrational drivers to become rational and gamble with odds in their favor?

But if everyone were rational, assuming half these drivers moved down the road and half of those were going the same way as me, I would still have a shorter wait at the empty (and come to find out cheaper!) station I ended up at one mile down the road. So I guess I should praise common irrationality rather than bemoan it