The article Effect of Face Value on Product Valuation in Foreign Currencies (J. Consum. Res. 2002) describes

Question:

The article “Effect of Face Value on Product Valuation in Foreign Currencies” (J. Consum. Res. 2002) describes a classroom experiment involving 97 business students to see whether they could adjust for exchange rates when deciding how much to spend a product. The students acted as buyers in a mock World Garment Expo at which each would be purchasing silk ties from six different nations. They were provided pictures of the ties and the exchange rates for each national currency into US$; the pictures were randomly permuted to reduce any perceived quality differences. Students then had to report how much, in the foreign currencies, they would pay for one silk tie. The average prices students were willing to pay, converted back into dollars, appear in the accompanying table; exchange rates are the number of foreign currency units (e.g., Norwegian krone or Japanese yen) equaling $1.

Relevant sums of squares include SS(Country) = 2752, SSE = 45,086, and SST = 86,653.
a. What experimental design was used in this study? What was the advantage of using this method?
b. Construct an ANOVA table from the information provided, then test the null hypothesis of “no currency exchange effect” at the .01 level.
c. The exchange rates vary by orders of magnitude (this was deliberate). As the exchange rate increases, what happens to the average amount students are willing to pay for a silk tie in that currency? (The article’s authors note that “th[is] evidence is against the common wisdom that when the home currency is perceived to go a long way in foreign currency terms, the foreign currency will be treated as play money and that people will overspend.”)

Fantastic news! We've Found the answer you've been seeking!