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The face value of foreign currency on consumer price perception—The moderating effect of product substitution

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  • Lin, Ying-Ching
  • Fang, Shiuan-Huei

Abstract

Consumers shopping in a foreign environment evaluate prices based on the relationship between the local currency's face value and their home currency. The face value effect suggests that when a foreign currency is a multiple of domestic currency (HDCs), consumers overestimate the actual value. In contrast, when their domestic currency (LDCs) is a fraction of the foreign currency, consumers underestimate the actual value. Three experiments examine a premium product's moderating effect on foreign currency face values. Results show the foreign currency's face value biases consumer price perception. Testing the face value effect, product substitution serves as an important moderator. The findings suggest implications for regional pricing, Internet pricing, and international tourism pricing.

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  • Lin, Ying-Ching & Fang, Shiuan-Huei, 2013. "The face value of foreign currency on consumer price perception—The moderating effect of product substitution," Journal of Business Research, Elsevier, vol. 66(6), pages 745-751.
    • Handle: RePEc:eee:jbrese:v:66:y:2013:i:6:p:745-751
    DOI: 10.1016/j.jbusres.2011.09.013
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    References listed on IDEAS

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    Cited by:

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    2. Carlos Javier Ayala Regalado, 2014. "Percepción del valor del dinero y asignación de precios en un grupo de habitantes de la ciudad de Medellín," Escenarios: Empresas y Territorio, Institución Universitaria ESUMER, January.

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