It still boggles my mind that people are surprised by this. Mathematically, ... Its an interesting social phenomenon, that large-scale opaque repricing of a co

It still boggles my mind that people are surprised by this. Mathematically, ... Its an interesting social phenomenon, that large-scale opaque repricing of a commodity is met with opportunistic ~scalping. This happened accross europe during the conversion to the Euro. US consumers are probably rightly suprised. Despite the expectations of economists that the euro change over would have no effect on prices, European consumers perceived the opposite. To shed some light on this puzzle, we develop a model of imperfect information in which cheaper goods experience higher price growth after the changeover. Retailers, aware of consumers’ difficulties in adopting the new currency, use currency changeovers to increase profits by in creasing prices. The lower the price transparency after the changeover, the higher the euro–related inflation. Using data on inflation (Eurostat) and price levels (Economist Intelligence Unit), we show that although the euro changeover did not significantly increase inflation, it nevertheless had distortionary effect on prices. {etc} http://www.kellogg.northwestern.edu/faculty/dziuda/personal/pdf/jcmb_veryfinalrevision2.pdf http://www.kellogg.northwestern.edu/faculty/dziuda/personal/...