Euro Illusion: Psychological Insights into Price Evaluations with a Unitary Currency
Abstract
The Euro illusion is a phenomenon related to the money illusion whereby people are biased toward the nominal representation of the Euro (the numbers printed on notes and coins) when evaluating prices in the new currency. In Study 1 the Euro illusion was demonstrated in telephone interviews of a Swedish population-based sample. However, no Euro illusion was found for British students in Study 2. An additional two studies employing student samples demonstrated the Euro illusion for fictitious unknown currencies in that prices of goods or services were evaluated as less expensive when the money unit was larger. An exception, however, was that prices were evaluated as more expensive when the money unit was very small (like the Italian Lira). Furthermore, the illusion was weaker or absent for low-price essential goods or services or for an induced negative attitude toward the currency change.
References
1998). Constructive consumer choice processes.. Journal of Consumer Research, 25, 187– 217.
(1999). The transition to the Euro: Some perspectives from economic psychology.. Journal of Consumer Policy, 22, 91– 116.
(in press). Cognitive euroscience: Scalar variability in price estimation and cognitive consequences of switching to the Euro.. Quarterly Journal of Experimental Psychology,.
(1993). The psychology of attitudes. . Fort Worth, TX: Harcourt Brace Jovanovich. .
(1928). The money illusion. . New York: Adelphi. .
(2000). Positive affect and decision making.. In M. Lewis & J.M. Havieland (Eds.). Handbook of emotions (2nd ed., pp.417-435). London: Guilford. .
(1999). A range theory of price perception.. Journal of Consumer Research, 25, 353– 367.
(1995). Empirical generalizations from reference price research.. Marketing Science, 14, G161– G169.
(1998). Perceiving luxury and necessity.. Journal of Economic Psychology, 19, 591– 606.
(1996). Asymmetric reference price effects and dynamic pricing policies.. Marketing Science, 15(1), 60– 85.
(2001). Older and younger adult's strategy use in currency conversion tasks: Insights from French franc to Euro and Euro to French franc conversion.. Journal of Experimental Psychology, 3, 195– 206.
(2001). Strategy use in currency conversion tasks: The examples of Euro to French franc to Euro conversions.. Current Psychology Letters, 4, 39– 50.
(1999). Changing “EUROpe”—The Euro as a new subject for psychological research in numerical cognition.. European Psychologist, 4, 152– 156.
(1998). Explaining attitudes toward the Euro: Design of a cross-national study.. Journal of Economic Psychology, 19, 663– 680.
(1965). Money, interest, and prices (2nd ed.).. New York: Harper and Row. .
(1993). The adaptive decision maker. . New York: Cambridge University Press. .
(2001). The role of reference prices in consumers' willingness to pay judgments: Thaler's beer pricing task revisited.. Acta Psychologica, 106, 265– 283.
(2000). Emotion, cognition, and decision making.. Cognition and Emotion, 14, 433– 440.
(1997). Money illusion.. The Quarterly Journal of Economics, 112, 342– 374.
(1999). Mental accounting matters.. Journal of Behavioral Decision Making, 12, 183– 206.
(