Consumer price knowledge before and after the euro changeover

This article examines how the price knowledge of Finnish consumers has changed since the adoption of the euro. Our study measures price knowledge by comparing consumers’ price estimations with actual market prices at two points in time: before (October 2001) and after (March 2002) the changeover to the euro. Furthermore, we study potential differences between three different age groups. We approach the issue using four determinants, namely (1) response percentage (the percentage of respondents who were able to give a price estimate); (2) the difference between the median of the market prices and the median of the price evaluations; (3) the difference between the average of the market prices and the average of the price evaluations; and (4) the average of the absolute deviations between the average of product prices and consumer price evaluations. Our results indicate that, on average, consumers know the prices of grocery products quite well despite the prevailing dispersion of actual prices in the market. Price knowledge was found to be rather good both before and after the introduction of the euro. Nevertheless, the good price knowledge after the changeover was probably because consumers remembered the prices asked in the old currency and converted them to euros. The majority of respondents were able to give price estimates that were within the range of actual price dispersion in stores. The results also show some deterioration in price knowledge after the advent of the euro. There was variation between different age groups, and it seems that the introduction of the euro has affected various groups differently. Consumers aged 30–50 years knew prices best both before and after the euro, whereas the ability to estimate prices had declined most among consumers above 50 years after the euro changeover.