Euro illusion or the reverse? Effects of currency and income on evaluations of prices of consumer products

Previous research has demonstrated a “euro illusion” in that product prices are evaluated to be more expensive in a small-unit currency (high nominal value) than in a large-unit currency (low nominal value). With the aim of demonstrating a reverse euro illusion when the income is obtained in the same currency, in Experiment 1 different groups of undergraduates with or without knowledge of a disposable income evaluated prices of consumer products expressed in high or low nominal values. Since only a weak effect was observed, in Experiment 2 a budget constraint was added to the disposable income to increase its salience. However, a clear effect was only obtained in Experiment 3 when participants, with knowledge of a disposable income, rated whether they would afford to purchase the consumer products. In this experiment the euro illusion prevailed for low-priced products but tended to be reversed for high-priced products.