Why you spend more when the currency is unfamiliar

The same dinner costs a two-figure number at home and a five-figure number abroad, or the reverse. Travellers overspend in the second case and underspend in the first, and the direction is predicted not by the real price but by whether the local currency has more or fewer digits than the one they think in.

What everyone sees

Holiday overspending is put down to a festive mood, or to the difficulty of doing arithmetic in a restaurant. Both contribute, and neither predicts the direction. Mood would produce indiscriminate overspending; the observed pattern flips sign depending on the nominal scale of the currency, which points at the digits rather than at the disposition.

What is actually happening

Raghubir and Srivastava examined valuation in foreign currencies and found systematic bias tracking the face value of the notes rather than their real worth, with participants spending more freely where the nominal figures were smaller than the home equivalent and more cautiously where they were larger. Wertenbroch, Soman and Chattopadhyay refined the account, showing the effect is reference-dependent: the numerosity of the foreign currency is evaluated against the numerosity of the home currency, so the same money produces opposite errors for travellers arriving from different directions. Conversion is available in both cases and is performed as an afterthought. The impression of expensive or cheap has already been formed from the digit count.

Why it stays hidden

The bias hides because the arithmetic is genuinely accessible. Anyone can divide, everyone knows the rate, and correcting an anchor requires knowing that an anchor was set. The feeling arrives before the calculation and is not experienced as a step, so the calculation ends up adjusting an impression rather than replacing it.