Pricing behavior and the introduction of the euro: evidence from a panel of restaurants
AbstractThis paper assembles an original panel of data from 2,500 restaurants in Italy over 1998-2004, with the objective of studying whether the euro cash changeover had an impact on individual pricing behavior, as apparently perceived by consumers, and which economic mechanisms may explain it. On the first point, the data show that only about a price increase of 3-4 percentage points can be attributed to the new currency; the changeover focussed the public attention over a medium-run trend, prompting the attribution of the whole increase to the introduction of the euro. On the second point, we reach two conclusions. We find evidence consistent with the existence of “menu-costs”: during the changeover the rise in the average meal price is mainly due to a larger fraction of agents who simultaneously revise their price. We also find that during the changeover more market power (proxied by a index of concentration on local markets) was associated with larger price increases; we propose a simple interpretation based on consumer behavior which may also explain why the effects of the cash changeover were especially pronounced in this industry as opposed to more competitive ones.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0501029.
Length: 45 pages
Date of creation: 20 Jan 2005
Date of revision: 15 Feb 2005
Note: Type of Document - pdf; pages: 45
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euro cash changeover; menu cost;
Other versions of this item:
- Gaiotti, Eugenio & Lippi, Francesco, 2005. "Pricing Behaviour and the Introduction of the Euro: Evidence from a Panel of Restaurants," CEPR Discussion Papers 4893, C.E.P.R. Discussion Papers.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-23 (All new papers)
- NEP-CBA-2005-01-23 (Central Banking)
- NEP-EEC-2005-01-23 (European Economics)
- NEP-MAC-2005-01-23 (Macroeconomics)
- NEP-MON-2005-01-23 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giancarlo Marini & Fabrizio Adriani & Pasquale Scaramozzino, 2003.
"The Inflationary Consequences of a Currency Changeover: Evidence from the Michelin Red Guide,"
CEIS Research Paper
27, Tor Vergata University, CEIS.
- Fabrizio Adriani & Giancarlo Marini & Pasquale Scaramozzino, 2004. "The Inflationary Consequences Of A Currency Changeover: Evidence From The Michelin Red Guide," Royal Economic Society Annual Conference 2004 45, Royal Economic Society.
- Bart Hobijn & Andrea Tanbalotti & Federico Ravenna, 2005.
"Menu Costs at Work: Restaurant Prices and the Introduction of the Euro,"
2005 Meeting Papers
659, Society for Economic Dynamics.
- Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2006. "Menu Costs at Work: Restaurant Prices and the Introduction of the Euro," The Quarterly Journal of Economics, MIT Press, vol. 121(3), pages 1103-1131, 08.
- Bart Hobijn & Federico Ravenna & Andrea Tambalotti, 2004. "Menu costs at work: restaurant prices and the introduction of the euro," Staff Reports 195, Federal Reserve Bank of New York.
- Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 655-690, May.
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