engleski

Euro-illusion: do prices seem higher in euros than in Croatian kunas?

The “Euro illusion“ is a bias in which the subjective value of money is affected by nominal value (prices seem to be lower in Euros than in Croatian Kunas). Our experiment involved a price estimation task in which we found the people are occasionally prone to such bias. The outcome of purchase decisions often depends on one’s motivation to think as well as one’s susceptibility to certain cognitive biases related to nominal value of money. The results of previous research on judgmental biases and their relationship with the need for cognition, as a variable which has an impact on the elaboration level, are inconsistent. Hence, the aim of this study was to clarify this socio-cognitive area. The term “Euro illusion” refers to a bias in which the subjective value of money is affected by its nominal value (prices seem to be lower in Euros rather than in Croatian kunas). 137 students from the University of Zadar took part in an experiment in which they were asked to estimate the typical price for each of the products or services presented in the questionnaire. Depending on experimental conditions, they assessed the price of products/services in Euros or kunas for local (Croatian) or foreign (Moldovan) shopping outlets, according to a 2 (currency: Euro vs. kuna) x 2 (mental frame: Croatia vs. Moldova) factorial design between subjects. Moreover, participants also completed an abbreviated version of Need for cognition Scale (Cacioppo and Petty, 1982). Our results show that participants gave, on average, higher price estimates in Euros than in kunas for products, such as apples, deodorant, chicken, suntan lotion and milk. The effect of the mental frame, i.e., the shopping outlets in Croatia/Moldova for which participants were assessing price of products and services, did not reach the significance level. None of the average price estimations of the given (categories) of products in Euros were correlated with the total score on the Need for cognition scale. Finally, an insignificant difference in the estimation of the typical price of products and services in Croatian shopping outlets in 2014 and the expected prices in 2015 in the same outlets suggests, overall, that participants are only prone to judgmental biases in particular situations. It also seems that the motivation when engaging in cognitively challenging tasks does not depend on bias expression. One suggestion for the solution of the reduction of the “Euro illusion” is that the price labels of products and services should be marked in both kunas and Euros.

Euro-illusion; cognitive bias; money value

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