Pricing behaviour and the introduction of the euro: evidence from a panel of restaurants

Gaiotti, Eugenio; Lippi, Francesco

doi:10.1007/978-3-540-78370-1_4

Cited by 110 publications

(25 citation statements)

References 6 publications

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“…Such evidence was found in Gaiotti and Lippi (2004) and Hobbijn, Ravenna and Tambalotti (2006) for restaurant prices.…”

Section: F Actors Possibly Driving the Gap Between Measured And Persupporting

confidence: 55%

“…Such evidence was found in Gaiotti and Lippi (2004) and Hobbijn, Ravenna and Tambalotti (2006) inflationary impact of the changeover, the finding that these price increases were mainly observed in low-priced and therefore frequently bought items or in outlets where consumers tend to buy a single good or service, such as in restaurants or in local shops, made them even more visible and may have strengthened the points made by Brachinger. Moreover, it has been argued that the introduction of the euro complicates information processing for consumers.…”

Section: Ordersmentioning

confidence: 79%

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Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake?

2007

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Editorial DirectorJan Smets, Member of the Board of Directors of the National Bank of Belgium Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. OrdersFor orders and information on subscriptions and reductions: National Bank of Belgium, Documentation -Publications service, boulevard de Berlaimont 14, 1000 Brussels led to pronounced price increases. This debate started in the period immediately before the euro cash changeover, as already at that time many consumers expressed their fear that the conversion would be taken as an opportunity to increase prices unduly. Immediately after the changeover in January 2002 this issue became a really hot topic. In Germany, for instance, the euro was labeled "Teuro", associating the new currency directly with the German word "teuer" -expensive. Rather than suggesting that the euro debate was a primarily German phenomenon, this metaphor illustrates the tone and intensity of the controversy at that time. Even now, 5 years after the changeover, this sentiment is still alive. magnitude is in no wise proportional to the heated character of the ongoing debate. An indirect test for price level effects is provided by Angelini and Lippi (2006): they find no evidence of a eurorelated increase in the price level using data on cash withdrawals from ATMs in Italy. Probably the most convincing argument for claiming that the inflationary impact was mild can be found in the fact that aggregate inflation in the euro area continued to be relatively close to 2 percent during the period considered, despite the occurrence of some clearly identifiable inflationary shocks which were orthogonal to the changeover, such as increases in crude oil prices, BSE-related increases in food prices, increases in indirect taxes and administered prices and the lagged transmission of the depreciation of the euro in the period 1999-2000.All this leaves us with the impression that the euro cash changeover has driven a wedge between actual and perceived inflation. The paper add...

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“…Such evidence was found in Gaiotti and Lippi (2004) and Hobbijn, Ravenna and Tambalotti (2006) for restaurant prices.…”

Section: F Actors Possibly Driving the Gap Between Measured And Persupporting

confidence: 55%

Section: Ordersmentioning

confidence: 79%

Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake?

2007

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“…This is a simple way of modeling a possibly higher price mark-up during the changeover. In Gaiotti and Lippi [2004], the higher mark-up is generated by the assumption that a fraction of consumers is unable to observe the new prices allowing firms to raise prices without affecting demand.…”

mentioning

confidence: 99%

“…The model also predicts that a firm's market power (as measured by the equilibrium price elasticity of demand) does not help to predict the direction of the impact, only whether or not we can expect to observe one. A price increase should, therefore, not be viewed as a sign of lack of competition (as argued in Gaiotti and Lippi [2004]) because a firm charging a high markup may just as well reduce prices at the changeover.…”

mentioning

confidence: 99%

“…More importantly, the data set is constructed to be representative of the entire industry. In two interesting studies, Gaiotti and Lippi [2004] and Adriani et al [2009] use data from the Michelin Red Guide, a restaurant guide that is published on a yearly basis covering restaurants of relatively high quality. Both studies report a positive effect of the changeover on restaurant prices.…”

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confidence: 99%

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Optimal price setting during a currency changeover: theory and evidence from french restaurants

2014

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RésuméCe papierétudie le comportement de fixation des prix des entreprises lors d'un changement de monnaie. Les difficultés des acheteurs face au nouveau prix nominal créent a court terme des incitations pour les vendeursà augmenter leurs prix, mais induisent aussi un risque sur la réputation des vendeursà long terme. Nous modélisons cet arbitrage etétudions les conditions pour lesquelles il est optimal d'augmenter ou de diminuer un prix au moment de la conversion. Une variable essentielle dans cette décision est l'information disponible aux acheteurs sur la conversion opérée par le vendeur; (i) la taille de l'entreprise, (ii) la proportion d'acheteurs réguliers, et (iii) la visibilité du prix d'un produit modifient cette information et affectent la décision de conversion des prix. A partir de prix individuels de produits vendus dans les restaurants en France, nous estimons l'effet du passageà l'euro par une méthode de différence-de-différences et montrons que les résultats sont cohérents avec les prédictions du modèle théorique. En effet, au moment du passageà l'euro dans l'Union Monétaire Européenne, les prix ont eu tendanceà moins augmenter dans les restaurants de grande taille, dans les restaurants où les touristes sont moins nombreux, surtout quand les prix sont particulièrement visibles. Codes classification JEL: E31, F33, M39.Mots-clés: fixation des prix, passageà l'euro, inflation. AbstractThis paper studies firms' price-setting decision during a currency changeover. Buyers' difficulties with the new nominal price level create incentives to raise real prices temporarily but doing so comes at the risk of damaging a seller's reputation in the long run. We model firms' trade-off and study under which conditions increasing or decreasing prices is optimal. A key variable in the decision is buyers' information about a firm's conversion, which in turn is affected by (i) a firm's size, (ii ) the proportion of regular buyers, and (iii ) the visibility of a good's price. Difference-in-differences analyses based on micro-data of French restaurants strongly support the model's predictions empirically. Indeed, prices around the 2002 changeover in the European Monetary Union are less likely to rise in larger and non-tourist restaurants, especially when prices are advertised.JEL classification: E31, F33, M39.

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Did prices really soar after the euro cash changeover? Evidence from ATM withdrawals

Angelini

Lippi

2008

The Euro, Inflation and Consumer’s Perceptions

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The introduction of the euro notes and coins in the first two months of 2002 was followed by a lively debate on the alleged inflationary effects of the new currency. In Italy, as in the rest of the euro area, survey-based measures signaled a much sharper rise in inflation than that measured by the official price indices, the quality of which was called into question. In this paper we gather indirect evidence on the behavior of prices from the analysis of cash withdrawals from automated teller machine (ATM) terminals. Since these data do not rely on official inflation statistics, they provide an independent check for the latter. We present a simple set of assumptions to test the hypothesis that, after the introduction of the euro notes and coins, consumer prices increased more than was recorded by the official statistics. We do not find evidence in support of this hypothesis.

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Pricing behaviour and the introduction of the euro: evidence from a panel of restaurants

Cited by 110 publications

References 6 publications

Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake?

Assessing the Gap between Observed and Perceived Inflation in the Euro Area: Is the Credibility of the HICP at Stake?

Optimal price setting during a currency changeover: theory and evidence from french restaurants

Did prices really soar after the euro cash changeover? Evidence from ATM withdrawals

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