The impact of tax exclusive and inclusive prices on demand
We test the equivalence of tax-inclusive and tax-exclusive prices through a series of experiments that differ only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more when faced with tax-exclusive prices. This treatment effect is robust to different price levels, to initial shopping-cart purchases and persists throughout most of the ten rounds. A goods-level analysis, intra-round revisions as well as results from a third tax-deduction treatment all cast doubt on salience as the source of our findings.
Year of publication: |
2012
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Authors: | Feldman, Naomi E. ; Ruffle, Bradley J. |
Institutions: | Federal Reserve Board (Board of Governors of the Federal Reserve System) |
Saved in:
freely available
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