Price setting behaviour and price setting regulations at the euro changeover

This paper documents that the impact of the euro changeover in January 2002 on prices was not uniform across the 12 participating countries. There are countries where prices increased significantly, but there are also countries where price-setting behaviour during the changeover does not appear to be very different from other points in time. This paper argues that the above difference can be explained by looking at the way countries regulated price setting during the changeover, and that any impact of the changeover could have been avoided with appropriate regulations. The gap between the actual and the perceived impact is addressed and policy recommendations for future changeovers are providedcurrency changeover, euro, economic policy, prices, perceived inflation

Integration of smed and triz in improving productivity at semiconductor industry

A case study on a test handler’s changeover process was conducted in a semiconductor organization (Intel Technology Sdn. Bhd.). The test handler being a constraint operation in the production supports the testing of two of the mainstream chipset products. Though the test handler is capable to support multiple chipset products but due to the equipment configuration complexity, the changeover process today requires an average 4 hours to fully complete. The long changeover duration degrades the overall productivity especially inability to meet customer demand timely, lower utilization and rising cost issues. These identified issues are potential factors that could impact the sustainability of the organization in long run. This case study focuses on improving the changeover process using techniques from Single Minute Exchange of Die (SMED) and Theory of Inventive Problem Solving (TRIZ). Both the techniques have individual strengths and weakness and thus the focus will be to integrate them to complement each other to enhance the changeover process duration further. Problems in the current process like non standard practices, complex hardware setup and waste activities that plagued today are process were identified and categorized accordingly. Later, appropriate techniques from SMED and TRIZ were proposed to counter these issues systematically. SMED will be used mostly for task simplification while TRIZ will be used for hardware part redesigns and overall process optimization. The end of mind of this study is to achieve a lean and optimized changeover process that can be performed below 30 minutes with no safety, quality or output concerns

The Euro Changeover and its Effects on Price Transparency and Inflation.

Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceived the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We use this insight to develop and estimate a model of imperfect information that explains why these goods were subject to higher price growth after the changeover. The data indicate that some retailers, aware of the consumers' diffculties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation of why this effect was smaller in more concentrated retail markets.euro, currency changeover, imperfect information, search costs, price setting.

The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: i) differently from restaurants in non-euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover, ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect such as menu adjustment and rounding up are only part of the story. We present a simple model of the catering market that is consistent with the evidence.Restaurants, Tourists, Euro, Currency Changeover.

Pricing behavior and the introduction of the euro: evidence from a panel of restaurants

This paper assembles an original panel of data from 2,500 restaurants in Italy over 1998-2004, with the objective of studying whether the euro cash changeover had an impact on individual pricing behavior, as apparently perceived by consumers, and which economic mechanisms may explain it. On the first point, the data show that only about a price increase of 3-4 percentage points can be attributed to the new currency; the changeover focussed the public attention over a medium-run trend, prompting the attribution of the whole increase to the introduction of the euro. On the second point, we reach two conclusions. We find evidence consistent with the existence of “menu-costs”: during the changeover the rise in the average meal price is mainly due to a larger fraction of agents who simultaneously revise their price. We also find that during the changeover more market power (proxied by a index of concentration on local markets) was associated with larger price increases; we propose a simple interpretation based on consumer behavior which may also explain why the effects of the cash changeover were especially pronounced in this industry as opposed to more competitive ones.euro cash changeover; menu cost

The Euro Changeover and Its Effects on Price Transparency, and Inflation. Mission Euro, Mission Accomplished!

Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceive the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We use this insight to develop and estimate a model of imperfect information that explains why these goods were subject to higher price growth after the changeover. The data indicate that some retailers, aware of the consumers' difficulties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation on why, contrary to common belief, this effect was smaller in more concentrated retail markets.euro, currency changeover, imperfect information, search costs, price setting

Costly Inflation Misperceptions

One of the consequences of the euro changeover in 2002 was that for a period of several years people considerably overestimated actual inflation. The goal of this paper is to study whether misperceptions of this kind may have real effects, that is, whether they induce people to alter their behaviour. We also discuss the question how far the euro changeover and the ensuing discussion about price stability contributed to the recession that followed the changeover. Looking at the German restaurant sector, we find that people’s misperceptions can have significant negative effects. The contraction this sector experienced in the months after the changeover was too pronounced to be explained by normal business cycle movements. We provide a discussion about the causes of these misperceptions and how to avoid them in future changeovers.euro changeover, perceived inflation

Rational inattention, inflation developments and perceptions after the euro cash changeover

This paper uses the euro cash changeover to test theories of finite informationprocessing capacities on the side of consumers. It argues that the denomination of prices in a new currency has increased the information-processing requirements for consumers by more than for sellers, a wedge that can lead to price increases. The size of the wedge should depend on the complexity of the currency conversion rates. In line with this theory, the paper finds that the evolution of prices for food products around the cash changeover varied across countries, depending on the complexity of conversion rates. These changeover effects are found in particular for goods with prices below one euro sold in mid-priced stores. The paper also finds that cross-country differences in the mismatch of perceived and actual inflation in the aftermath of the cash changeover are linked to differences in the complexity of conversion rates. JEL Classification: D84, E31, E58, L11euro cash changeover, perceived inflation, rational inattention

Coping with People’s Inflation Perceptions During a Currency Changeover

The gap between actual and perceived inflation is one of the more unexpected consequences of the euro changeover in January 2002. In this note we argue that this gap was caused by a lack of preparation and experience of the authorities to appropriately communicate with the public during the changeover. Using principles of crisis communication we identify the mistakes made and give policy recommendations for future changeovers.crisis communication, transformative explanation, perceived inflation, euro changeover