An Extention of Burgernomics: Using a Full-Service Restaurant to Measure Purchasing Power Parity

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Vol: 15, Issue: 1

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Bojanic, David; Warnick, Rod; Musante, Michael
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The purpose of this paper is to determine if the price of a ‘burger’ at a themed restaurant chain (i.e., Hard Rock Café) in the casual dining segment is a better indicator of purchasing power parity (PPP) than the price of a ‘burger’ at a quick-service restaurant chain (i.e., 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.