Monday, 21 July 2008

The money illusion

As holidays approach so does the season of silly money. I’ve just picked up a pile of Japanese yen for my Tokyo trip and, quite frankly, it could have come with a pile of community chest cards and a tiny iron for how real it looks to me.

No wonder that we all suffer from the money illusion when we visit foreign countries with a purse full of play money. Even when we know the conversion rate, the money illusion fools us about what the money is worth.

According to research we spend less when the foreign unit of currency is less than our own (e.g. £1 = 0.89 Oman Rials). But we spend more when the foreign unit is more than our own (e.g £1 = 1.25 Euros).

So with £1 = 220 yen, I guess that means I’m in for a blowout. Do not collect £200, do not pass Go, do pass on all those gorgeous Japanese designs ….mmm, we’ll see.

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