This paper studies the long-run effect of the 2002 changeover in the European Monetary Union on restaurant prices. During the changeover, restaurant prices increased significantly but rather than returning to their pre-changeover trend, restaurant prices appear to have stabilized on a higher path. This stands in contrast to the prediction of menu cost models or models of confusion-induced price increases, as these models can only account for a transitory effect. The persistence of the increase suggests the existence of more than one price equilibrium. The paper suggests a theoretical explanation for the persistent impact.

Speaker

Thomas Eife

Universität Heidelberg

Date

19.07.2012 | 16:00 - 17:30

Event Location

ZEW, L 7,1 D-68161 Mannheim

Room

Hamburg

Department
  • Competition and Regulation
Category

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