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The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide

  • Fabrizio Adriani
  • Giancarlo Marini
  • Pasquale Scaramozzino

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: (i) differently from restaurants in non-euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover; and (ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect, such as menu adjustment and rounding up, are only part of the story. We present a simple model of the catering market that is consistent with the evidence. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2008.

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 71 (2009)
Issue (Month): 1 (02)
Pages: 111-133

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Handle: RePEc:bla:obuest:v:71:y:2009:i:1:p:111-133
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  1. Ernst Fehr & Jean-Robert Tyran, 2004. "Money Illusion and Coordination Failure," CESifo Working Paper Series 1141, CESifo Group Munich.
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  7. 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.
  8. Soetevent, Adriaan R., 2005. "Anonymity in giving in a natural context--a field experiment in 30 churches," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2301-2323, December.
  9. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  10. Ernst Fehr & Jean-Robert Tyran, 2001. "Does Money Illusion Matter?," American Economic Review, American Economic Association, vol. 91(5), pages 1239-1262, December.
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  13. 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.
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