Italians and the Euro: The Impact of Time on Consumer Adjustment Strategies

SUMMARY The launch of the euro has caused significant consternation among consumers in the twelve participating countries. The transition has been particularly difficult for consumers from countries with traditionally high-denomination currencies such as Italy and Spain, since they are less accustomed to the lower numerical values of prices in euros (Labbé-Pinlon, 2003). This paper examines whether Italian consumers have successfully adapted to the new currency by substituting their old internal price references with a new set of prices that reflects a low-denomination currency. We propose that consumers facing an unfamiliar currency can either use currency conversion tactics that keep their existing internal price references intact, or they can adjust these internal price references by substituting old pricing information with new prices. We propose that, over time, Italian consumers will adjust their internal price references to the low-denomination currency, since this is the most effective method for evaluating prices in the long run. Our findings suggest that Italian students have begun to replace the high-denomination lira with the low-denomination euro as an internal price reference system.