In the last few decades, money attitudes and spending behaviours have been widely studied. Several scales of attitudes towards money have been developed. One of the most commonly used is the scale developed by Yamauchi and Templer (1982) known as the money attitude scale (MAS). The authors identified five dimensions of attitudes towards money: Power-Prestige (using money to influence and impress others), Retention Time (careful planning spending money), Quality (purchasing of quality products), Distrust (maintaining a suspicious attitude towards money), and Anxiety (seeing money as a source of anxiety). Another money attitude scale was developed by Furnham (1984). This is known as the Money Beliefs and Behaviours Scale (MBBS). Furnham identified six money dimensions: Obsession, Power/Spending, Security/Conservative, Retention, Inadequate, and Effort/Ability.

In general, research on attitudes toward money shows that money cannot be reduced to its economic concept as a medium of exchange of goods and services. Instead, money for many people has different moral and emotional meanings. Engelberg and Sjöberg (2006) showed that emotions related to money – Power-Prestige, Distrust, and Anxiety of MAS – are related to a general ability to cope with emotions. Indeed, they found that a high level of seeing money as the source of power and prestige, being afraid of losing power and prestige together with losing money, and the anxiety related to money issues, were associated with a lower level of ability to cope with emotions and with emotional instability.

Lea and Webley (2006) claim that tool theories of money, i.e., that money is used instrumentally, are incomplete. They argue that money works as “a cognitive drug”, in the sense that money acquires its incentive power because it mimics the neural, behavioural or psychological action of some other, more natural incentive.

As presented below, research demonstrates that mere activation of the concept of money, as with other affectively loaded objects, can modify behaviour. Indeed, in a set of studies Vohs et al. (2006) tested consequences of inducing the concept of money in people’s minds. It turned out that in sets of natural tasks where participants simply thought about or saw money, this activation of money concept changed behaviour. In one study, the participants were asked to solve a difficult problem. It turned out that money-primed people acted in a more self-sufficient manner, i.e., they were less likely to ask for help. In another study, after money vs. neutral concept priming, participants were asked to declare any voluntary help with scientific projects. Money-primed participants offered less help. In still another study, participants were asked to choose between group activities or acting alone. It was found that money-primed participants preferred to spend time alone. Finally, participants were paid a small amount of money for their participation in an experiment, and were primed with a de-scrambling task, either containing money concept or neutral words. After some time and after false debriefing, the participants were asked to donate some money to the student fund. Money-primed participants donated significantly less money.

Other research shows that attitudes towards money have their impact on people’s earning, spending, and saving. In a study on earnings, Tang (1995) tested the influence of money attitudes on pay satisfaction. He found that people who display negative money attitudes were less satisfied with their earnings than those who display positive money attitudes. One may conclude that people who get a certain number of units in “bad money” are more dissatisfied than those paid with “good money”. Tang et al. (2004) even showed that people who dislike money, perceive it as less valuable, and in consequence need more money to achieve the same level of perceived utility as those who like money. In his study he asked low- and high-money-loving participants to tell what level of raise in their earnings would increase their level of pay satisfaction to a certain maximum (the same for both groups). It turned out that for high-money-loving participants it was necessary to make the income 1.95 times higher, whereas for low-money-loving participants it was necessary to make the income 2.58 times higher.

Attitudes towards money may also influence consumer behaviour. For example, Tokunaga (1993) found that there was a relationship between attitude towards money and the number of credit cards the individual uses. Heavy users of credit cards tended to see money as a source of power/prestige, experienced more anxiety about financial matters, and were less concerned about retaining money than the control group.

It is not only abstract money that has symbolic and emotional meaning. As brought to light by Burgoyne et al. (1999), a concrete actual currency can, to an individual, have specific emotional meaning. Perhaps due to this, people resist changes concerning the money they are accustomed to. For example, Burgoyne et al. (1999) mention problems associated with the acceptance of a new decimal pound sterling and the introduction of the one pound coin in Britain. These problems presumably reflected the attachment of the Britons to the traditional form of money. Similarly, Lea and Webley (2006) quoted two attempts to introduce a dollar coin that failed because of public rejection. From a purely cognitive perspective, the form of money or its appearance should make no difference to money users. However, symbolic status of coins and banknotes apparently influences people’s perception of money. More recent studies on attitudes towards transition from a national currency to the euro in many European countries show that support vs. opposition to the common euro currency does not come from the perceived economic personal benefits, but originates from national or European feelings. For example, Meier and Kirchler (1998) found a relationship between national feelings and euro attitudes in Austria. In their research, moderate opposition to the euro was related to economic factors (perceived consequences of the euro introduction), whereas extreme positions (positive and negative) were associated either with strong European identity or with fear of threats to national identity. Similarly, Kokkinaki (1998) showed that national identity and attitudes towards the membership of Greece in the EU were significant predictors of the Greek attitudes towards the euro. Finally, Coquet and Müller-Peters (1998) analyzed a huge database from a cross-country study containing measures of European identity, patriotism and nationalism, and found that the nationalists’ attitudes, with strong affective components, led to negative feelings towards the euro. On the other hand, people with stronger European identity had more favourable feeling towards the euro. To summarize; In the studies reviewed above, national feelings vs. European identity were correlated with the individual’s attitudes towards the new euro currency. Economic factors were definitely less significant or almost completely insignificant.

The affective attachment to a currency may result in people’s resistance to proposed changes and may play a significant role in everyday consumer behaviour. A consumer, who is about to spend a sum of money on a certain product, evaluates whether the price for this product is fair. If the buyer considers a price to be too high, he or she may decide that the transaction is unprofitable and may decide not to buy the product at all.

We propose to treat currency effects as a special case of a labelling effect. Effects of labelling have been known in cognitive psychology for a long time. In a famous experiment by Carmichael et al. (1932) labelling ambiguous drawings with concrete nouns resulted in reproduction of these drawings in line with what the given label suggested. In subsequent experiments numerous further labelling effects have been described (Pohl 2004). Generally, these experiments show that human evaluations are significantly affected by labels affixed to a stimulus. In social psychology, categorization theories, such as the one developed by Fiske and Pavelchak (1986), posit that in evaluating an object people can use two kinds of information: information from their memory contained in the category label and incoming data about the features of an object.

Similarly, we assume that the price of a product expressed in a given currency consists of two separate pieces of information: a mere number and a currency label. The number carries the information on a higher or lower nominal value. On the other hand, prices in one currency can be perceived as higher (goods are perceived as more expensive) than in another, due to information contained in the category label. In some cases, the currency effect can be quite straightforward. For example, when people experience higher prices in one currency than in another, the label of the former currency may inadvertently pass on the information “expensive currency”. In such a case, prices expressed in this currency can be perceived as more expensive than prices in another currency.

However, prices can also appear to be more expensive when given in a currency that people feel emotionally attached to. How can affective attachment to a currency influence evaluation of whether the price for a product is high? Spending money is generally an unpleasant experience. When the label of the currency is associated with a positive affect, spending such a highly valued currency is more unpleasant than spending a less valued currency. Unpleasant feelings can, in turn, make the prices in such a currency appear higher than prices in a less valued currency.

It is believed that these hypotheses are in line with Tajfel’s accentuation theory (Tajfel and Wilkes 1963). This theory claims that people, apart from using information about physical features of objects or psychological features of persons, use also category information to form their evaluation. When objects are consistently categorized or labelled, not only the information about the objects, but also the information contained in the category itself guides the processes of making judgments. As a result, the perceived differences between objects belonging to different categories increase, and the differences between objects within the category decrease, which makes the evaluation accentuated in such a way that objects in the same category are seen as homogenous and the differences across the categories as larger than in reality.

This theory was supported in a study reported in Tajfel and Wilkes (1963). Participants were asked to estimate the lengths of lines of different sizes, presented in sets of three at a time. Each line was labelled A or B. In the control group letters were randomly assigned to the lines, which means that the label did not carry any information. In contrast, in the experimental group, the label “A” was assigned to the shorter lines and “B” to the longer lines. In this way, establishing a meaningful category label resulted in systematic changes in people’s estimations. People in the experimental group judged the differences between the lengths of lines to be larger across the categories of lines, which means that the category label carried some information (in this case: “A” means “short”) which was implicitly used in forming the judgments. As demonstrated, accentuation is a process that can make even the meaningless letter carry some information about the objects. However, in naturalistic scenarios, categories are affect laden, that is they are positively or negatively evaluated. In line with this, Dukes and Bevan (1952) showed that children perceived jars filled with colourful candies as heavier than jars of the same weight filled with sawdust and sand.

Naturally, apart from a currency label, assessments of the prices are also determined by the numbers, that is a higher or smaller nominal value of money. In this respect, since Fisher (1928), it has been known that prices can appear to be higher when given in a currency that yields nominally larger values. This phenomenon is referred to as the money illusion effect. Shafir et al. (1997) demonstrated the money illusion in several experiments. Instead of taking into account money’s real worth or purchasing power, people in their judgments of prices and earnings, use the nominal value of money.

Consumers would be susceptible to the money illusion during a currency change, when prices of products become denominated in a different currency and their nominal value changes. In most Euro zone countries, prices have become lower in nominal terms after the conversion to the euro. In consequence, research shows that prices in the euro are perceived as lower than the same previous prices expressed in the national currency (Gamble 2007). For example, a cross-cultural study (Gamble et al. 2002) reported that Swedish consumers succumbed to the money illusion or euro illusion when asked to evaluate prices in euro and Swedish crowns, as predicted on the basis of the exchange rate. Thus, prices in euro were evaluated as lower than prices in Swedish crowns. Similar results were reported in the Netherlands and Germany. Van Raaij and Van Rijen (2003) found that the money illusion caused Dutch consumers to accept higher prices of goods if presented in the smaller nominal values of the euro. In Germany, Jonas et al. (2002) found that in estimating prices from a department store catalogue, respondents succumbed to the money illusion effect which resulted in higher estimations in the euro. To sum up – the money illusion or the euro illusion was demonstrated when the euro prices were nominally lower. On the other hand, when prices in the euro become nominally higher, namely in the UK and Ireland, one can expect prices in the euro to be perceived as higher than prices in the national currency. A British study (Gamble et al. 2002) did not support this. However, in Ireland (Ranyard et al. 2005) people perceived a rise of prices and earnings when converted into the European currency.

In the following, two studies of price assessments in different currencies are reported. In both these studies it is assumed that the perception of prices is co-determined by the numbers, that is the nominal value of money, and by the currency label that carries some additional information about the prices. Thus, it is assumed that if the currency itself (category label) carries some information about the prices, consumers are expected to use this information in forming their judgments about prices. It is hypothesized that a positive affect attached to a currency may result in perception of prices in this currency as higher than prices expressed in a currency that is not affectively laden. Similarly, opinions that prices in a currency are high (labelled as an “expensive currency”) may result in perception of prices in this currency as higher than prices expressed in another currency. These effects are expected to neutralize the well-documented money or euro illusion.

Study 1: Affective Attachment to Currencies

Study 1 tests the hypothesis that prices expressed in an affectively positively loaded currency (“a good currency”) will be perceived as higher than the same prices expressed in a currency without an affect-based value. Advantage was taken of the fact that in the former East European communist countries national currencies were non-convertible, and that the US dollar was an important reserve of value and means of payment (Peebles 1991). This caused distrust in the national currency and the US dollar came to be regarded in Poland as the “better currency.” It became a universal currency used for denominating contracts, prices of real property, etc. It should also be emphasized that this study was conducted in 2001/2002, when the exchange rates between the dollar and the euro were in favour of the US dollar.

A two-step study was conducted (see Tyszka and Przybyszewski 2006, for a full description). First, it was important to test whether the US dollar, compared to other currencies, was really affectively loaded, i.e., whether in Poland the US dollar had a greater affective attachment or value than other currencies, including Poland’s own currency. Then a second step examined how prices expressed in US dollars are evaluated compared to prices in other currencies.

The semantic differential technique was used in the first step, where a set of 17 five-point scales was used to collect participants’ opinions about four currencies: the Polish zloty, the US dollar, the euro, and the Italian lira. The questionnaire was administered to 60 participants. Each participant evaluated all four currencies.

The ratings were subjected to principal component analyses with varimax rotation. It was shown that for a two-factor solution the different currencies displayed similar loadings of items for each factor. As shown in Table 1, the first factor consists of scales described as “good money.” The second factor consists of scales related more to physical characteristics of money, interpreted as “nice money.”

Table 1 Common factor structure based on semantic differential ratings of US dollars, Polish zloty, and Italian lira (Study 1)
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Figure 1 shows the average evaluations of the four currencies on the factor “good money.” As can be seen, the US dollar is evaluated as the best money. Thus, it is concluded that in Poland at the time of the study the US dollar had a greater emotional attachment than all the other currencies.

Fig. 1
figure 1

Evaluation of the four currencies used in Study 2 on the “good money” scale

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In the second step a set of consumer goods was presented, asking four independent samples of participants (102 women who declared to be the ones who most frequently do the shopping in their households) to evaluate the prices expressed in the four different currencies. In all four versions of the questionnaire, the products and services had the same real value, but were expressed in the four currencies: the Polish zloty (PLN), the US dollar (USD), the euro (EUR), and the Italian lira (ITL). The currency exchange rates were 1 USD = 1.15 EUR = 4.15 PLN = 2219.25 ITL. The participants were asked to assess how expensive different products were on a bipolar scale ranging from 1 (“very cheap”) to 9 (“very expensive”). The “shopping basket” of goods included basic goods such as food and clothing as well as durables.

As can be seen in Figure 2, in accordance with the money illusion, the prices expressed in the Italian lira were perceived as the highest, next prices expressed in the Polish zloty, then in the euro. In line with the money illusion, since the US dollar was nominally the smallest currency at the time of the research, the ratings of the prices in dollars should be even lower than the ratings of the prices in euro. It turned out to be the opposite: prices in the US dollar were perceived as higher than the prices in the euro. Thus, the money illusion effect disappeared. In the light of the first step, the disappearance of the money illusion effect may be attributed to the affective attachment to the US dollar. We conclude that the affective attachment increased the price evaluation by adding a positive affect-based value to the purchasing value of the currency.

Fig. 2
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Average ratings of the prices in US dollar (USD), euro (EUR), Polish zloty (PLN), and Italian lira (ITL) (Study 1)

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Study 2: Opinions About a Currency

In 2006 Poland still had its own national currency – the Polish zloty (PLN), but as Poland has become a member country of the European Union (EU), most citizens have been familiarized with the euro currency and with prices in the Euro zone countries. A representative sample of 300 Polish citizens was asked in a telephone interview the question whether prices in the countries using the euro are higher or lower than in Poland. A majority (55%) of the respondents answered that prices in the Euro zone are higher than in Poland, and only 19% answered that they are lower than in Poland. This suggests that, for the majority of the Polish population the euro is perceived as an “expensive currency.” Is such an opinion about a currency sufficient to influence price perception? As shown in an experiment by Traut-Mattausch et al. (2004), people in Germany who believed that introduction of the euro would cause a price increase, misperceived prices in the euro in spite of counterevidence at hand.

The purpose of Study 2 was to investigate whether prices in a currency that carries an opinion of being “an expensive currency,” are perceived as higher than prices in another currency. To answer this question a fictitious currency, the “tong” (TNG), of equal value to the euro was invented. It was hypothesized that prices in the euro will be perceived as higher than the same prices in this fictitious currency.

In the study three independent groups of Polish undergraduates (141 in total) were asked to assess how expensive a set of products are by marking their opinion on a bipolar scale ranging from 1 (“very cheap”) to 5 (“very expensive”). The set of products included basic ones such as food, cosmetics, and clothing as well as durables such as a TV set and a laptop computer. In the three versions of the questionnaire the prices of three products had the same real value but were expressed in the three different currencies Polish zloty (PLN), euro (EUR), and the fictitious currency (TNG) equal to the euro. The exchange rates were: 1 EUR = 1 TNG=3.88 PLN, and were disclosed in the questionnaire.

As can be seen in Figure 3, prices in euro and in zloty are in most cases evaluated as higher than prices in the fictitious currency. Prices in the Polish zloty are evaluated more or less equal to the prices in euro. An analysis of variance performed on evaluations of product prices with the currency as a factor revealed a significant main effect of the currency, F(2, 138) = 9.34, p < .001.

Fig. 3
figure 3

Price assessments of 15 goods in the consumer basket in a fictitious currency (TNG), euro (EUR), and Polish zloty (PLN) (Study 2)

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The impact of the currency on the evaluations of prices is easily seen on averages for the whole product basket. As shown in Figure 4, prices in the fictitious currency (the tong) were perceived as significantly lower than prices in the euro (p < .005 in a LSD post-hoc test). At the same time, prices in tong were perceived as lower than prices in zloty (p < .001 in a LSD post-hoc test). These results confirm a categorization effect of the euro as an “expensive currency.” In line with the accentuation theory, the evaluation of the prices is to some extent based on the opinion people hold about a currency.

Fig. 4
figure 4

Average ratings of the prices in a fictitious currency (TNG), euro (EUR), and Polish zloty (PLN) (Study 2)

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Higher evaluations of the prices expressed in zloty than the prices expressed in tong are in agreement with the money or euro illusion. However, one should consider explanation given by Gamble (2007). Finally, the fact that evaluations of prices expressed in zloty and in euro did not differ significantly suggests that the money illusion disappeared, presumably because of the categorization of the euro as an “expensive currency.”

Discussion

This paper has shown various ways in which currencies can possibly influence price perceptions. Research reviewed as well as two reported empirical studies show that prices in one currency can be perceived as higher than in another, even when the exchange rate is available. One of the ways in which currencies can influence price perceptions is the money or euro illusion (Gamble 2007). When the price is given in a currency that yield nominally a larger value it appears to be higher (goods appear to be more expensive). This seems to be a kind of a basic cognitive illusion in processing numerical information. For instance, Shafir et al. (1997) explain the money illusion by the anchoring heuristic, where the numbers are used as a cue for making evaluations, because they are most salient and easiest to process. Likewise, in studies on animal learning it has been shown that the same amount of food divided into many smaller parts works as a better reinforcer than one bigger unit (Pelham et al. 1994). Thus, the numerosity of objects, due to its vividness and simplicity, seems to have a stronger impact than the size of each unit.

On the other hand, we showed that price perception is also influenced by the currency label. Prices can appear to be higher when given in a currency that people think of as an “expensive currency.” Indeed, if the representation of the euro contains the concept of “expensiveness” and it becomes activated by the currency label, it starts operating in peoples’ minds, biasing their judgments in a way similar to the activation of stereotypes (Bargh 1997). Prices can also appear to be higher when given in a currency that people feel emotionally attached to. It is believed that this was the source of overestimating the prices in US dollars. This process seems to be similar to affect-referral heuristics, which replaces cognitive processes with recalling previous affective experience with an object (Payne et al. 1993).

How do these effects work together? In the present two studies the impact of two currency labels – the US dollar and the euro – neutralized the money illusion. This is in line with what was expected, since the Polish currency yields nominally larger values, while the US dollar was perceived as “a good currency,” and the euro was perceived as “an expensive currency,” both leading to the perception of prices in dollars and euros as higher. Of course, there are cases when different effects may reinforce each other. For example, knowing that the Latvian currency – the lat – is worth about 1.45 euro, and assuming that the Latvian are more attached to the euro than to the lat, one would expect them to perceive prices in euro as much higher than in lat.

In the present research, the focus was on price perception, which from the consumer’s perspective belongs to the domain of losses. However, currency changes may also influence the perception of earnings, which from the consumer’s perspective belong to the domain of gains. It would be interesting to investigate whether the effects found in the domain of losses are present in the domain of gains. Some hint for this may be found in the studies by Ranyard et al. (2005) in Ireland where a nominal growth of earnings made the Irish more satisfied with their income.

As far as emotional factors in the currency perception are concerned, apart from the emotional attachment to the currency, there are possible cases where the source of affect is not the experience with the currency itself, but some other circumstances associated with this currency. For example, introducing the euro as a common currency in the EU evokes in some Europeans positive and in others negative attitudes. The impact of such attitudes on the perception of prices in euros can be completely different than the one shown here for prices in US dollars in Poland. Both euro-enthusiasts and euro-sceptics may want to seek affective-cognitive congruence in their perception of the euro. Thus, those who dislike the euro as a common currency may tend to see prices in euros as higher, and those who like the euro as a common currency may tend to see prices in euros as lower – both groups doing so (unconsciously) in order to make perceptions congruent with their attitudes. In line with this, Traut-Mattausch et al. (2004) found that people whose attitudes towards the euro were negative overestimated the prices in the euro more than those with positive attitudes.