Learning the value of a new currency from prices

Abstract

In European countries, field studies investigate how citizens acquire knowledge of the new currency, the euro. In 3 laboratory experiments, the authors recruited 168 undergraduates to examine whether such accurate knowledge is acquired from learning prices in the new currency. The results show fast learning of prices of duration of cellular phone calls (quantity) when the prices were proportional to quantity. Inferences of call duration from given prices were likewise found to be accurate. Lower accuracy was however observed for one-to-many mappings of quantity on price and the inverse one-to-many mappings of price on quantity. Price variation may be an important reason for the difficulty in learning the value of the new currency observed in field studies.