Salience and taxation: Salience effect versus information effect
Zheng Yuqing
Salience and taxation: Salience effect versus information effect - Applied economics letters Volume 20, number 5 .
Posting tax-inclusive price tags on grocery products can reduce demand through an information effect that corrects consumers who misperceive the actual tax status. We disentangle the information effect from the salience effect developed by Chetty, Looney and Kroft (2009, CLK for short). By utilizing CLK's survey finding that 20% of shoppers mistakenly think there is no sales tax on toothpaste, we show that the information effect actually explains 31% of the sales drop in CLK's field study. Therefore, ignoring the information effect may overestimate the salience effect by a large degree.
13504851
Demand--Sales tax--Information effect
HB1.A666 APP
Salience and taxation: Salience effect versus information effect - Applied economics letters Volume 20, number 5 .
Posting tax-inclusive price tags on grocery products can reduce demand through an information effect that corrects consumers who misperceive the actual tax status. We disentangle the information effect from the salience effect developed by Chetty, Looney and Kroft (2009, CLK for short). By utilizing CLK's survey finding that 20% of shoppers mistakenly think there is no sales tax on toothpaste, we show that the information effect actually explains 31% of the sales drop in CLK's field study. Therefore, ignoring the information effect may overestimate the salience effect by a large degree.
13504851
Demand--Sales tax--Information effect
HB1.A666 APP