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An Extension of Burgernomics: Using A Full-Service Restaurant Product to Measure Purchasing Power Parity

2007; Taylor & Francis; Volume: 15; Issue: 1 Linguagem: Inglês

10.1080/10913211.2007.10653830

2152-2790

David C. Bojanic, Rod Warnick, Michael Musante,

Consumer Market Behavior and Pricing

ABSTRACT The purpose of this paper is to determine if the price of a hamburger at a themed restaurant chain (Hard Rock Cafe) in the casual dining segment is a better indicator of purchasing power parity than the price of a hamburger at a quick-service restaurant chain (McDonald's). The “Big Mac Index” published by The Economist is the source for the price of a Big Mac sandwich in each of the represented countries. The index was originally developed to measure purchasing power parity based on exchange rates. An alternative index, the Legendary Burger Index, is developed and compared to the Big Mac Index to determine the accuracy of the prices for the two types of restaurants in measuring purchasing power parity. The Legendary Burger Index was shown to perform slightly better than the Big Mac Index when examining currency valuations and the relationship between the burger price and various economic variables.