Linear Thinking in a Nonlinear World

by Bart de Langhe, Stefano Puntoni, and Richard Larrick

Test yourself with this word problem: Imagine you’re responsible for your company’s car fleet. You manage two models, an SUV that gets 10 miles to the gallon and a sedan that gets 20. The fleet has equal numbers of each, and all the cars travel 10,000 miles a year. You have enough capital to replace one model with more-fuel-efficient vehicles to lower operational costs and help meet sustainability goals.

Which upgrade is better?

  1. Replacing the 10 MPG vehicles with 20 MPG vehicles
  2. Replacing the 20 MPG vehicles with 50 MPG vehicles

Intuitively, option B seems more impressive—an increase of 30 MPG is a lot larger than a 10 MPG one. And ...

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