The influence of price trend expectations on price trend perceptions: Why the Euro seems to make life more expensive?

Abstract

The present study investigated whether initial expectations of rising prices causally influence price trend judgments even in the presence of unequivocal contrary evidence. To this end, a 2 (real price trend) × 3 (expected price trend) factorial experiment was conducted. Participants compared the prices of two menus, one priced in German Marks and the other priced in Euros. The average Euro price was either higher than or the same as the average German Mark price. Expectations of either higher prices or stable prices were induced. In a control condition, no expectation was induced. As expected, price trend perceptions were causally affected by price trend expectations. On the one hand, the manipulated expectation of rising prices yielded a perception of price increases even when the real prices remained stable. On the other hand, when the real prices increased but an expectation of stable prices had been induced the real price trend was underestimated.