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| Author: | Raghubir, P. Srivastava, J. |
| Title: | Effect of Face Value on Product Valuation in Foreign Currencies |
| Journal: | Journal of Consumer Research
2003 : DEC, VOL. 29:3, p. 335-347 |
| Index terms: | DECISION MAKING CONSUMERS CONSUMER EXPENDITURE CONSUMER BEHAVIOUR CURRENCY |
| Language: | eng |
| Abstract: | This article examines systematic differences in people's spending behavior when using foreign currencies. Rather than overspend or underspend in general, the authors show that individuals' valuation of a product in an unfamiliar foreign currency is biased toward its nominal value with inadequate adjustment for the exchange rate. This leads to underspending when the face value of a foreign currency is a multiple of an equivalent unit of a home currency and overspending when it is a fraction. Four studies demonstrate the robustness of the face value effect across different currencies, exchange rate frames, and with samples from two countries, and two studies show that ability-related factors such as time pressure and experience moderate the face value effect. |
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