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Hippo,
Yes the ECU retards timing after knocking.
If you wack your block with the handle of a screwdriver while the car is running you will actually be able to hear it retard itself.
I'd say the premium is worth it. Not only do you get better performance and usually better mileage, its better for your engine and fuel system because of the low parrafinic compound content (parrafins are refined out in higher grades of fuel).
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