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.