The Impact of Tax Exclusive and Inclusive Prices on Demand
AbstractWe 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.
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Bibliographic InfoPaper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 1302.
Length: 48 pages
Date of creation: 2013
Date of revision:
experimental economics; sales tax; VAT; tax salience;
Other versions of this item:
- Naomi E. Feldman & Bradley J. Ruffle, 2012. "The Impact Of Tax Exclusive And Inclusive Prices On Demand," Working Papers 1207, Ben-Gurion University of the Negev, Department of Economics.
- Naomi E. Feldman & Bradley J. Ruffle, 2012. "The impact of tax exclusive and inclusive prices on demand," Finance and Economics Discussion Series 2012-50, Board of Governors of the Federal Reserve System (U.S.).
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-EXP-2013-07-28 (Experimental Economics)
- NEP-PBE-2013-07-28 (Public Economics)
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