The Euro in the common European market: A single currency increases the comparability of prices

Two studies examine the psychological consequences the introduction of the Euro has for the evaluation and estimation of product prices. Research on comparison processes suggests that a single currency increases the comparability of prices. If this is indeed the case, then a reference price from another European country should be more likely to influence evaluation and estimation of a target price, if both are given in the same currency. Results of two studies support these predictions. Participants evaluated (Study 1) or estimated (Study 2) a target price in the context of a low reference price. Target and reference price were either given in Euro as a single currency or in Euro and British Pounds as two distinct currencies. The low reference price exerted a stronger influence on evaluations and estimations of the target price if both were given in a single currency. We speculate that the increased comparability of prices that is a consequence of the introduction of the Euro may ultimately lead to lower consumer prices. 2003 Elsevier B.V. All rights reserved. PsycINFO classification: 3040 JEL classification: D81