Are We (Un)Consciously Driven by First Impressions? Price Declarations vs. Observed Cinema Demand when VAT Increases

The aim of this research is to shed light on how people's self-declared price perceptions could be affected by external factors other than real prices. Also, we analyze if these perceptions, particularly when inaccurate, determine later economic behavior. We study how a rise in the Spanish Cultural VAT triggered changes in actual prices, price perceptions and cinema demand. We find that price declarations in survey responses, as they are based on intuitive thinking, are affected by other features than prices. These factors, which are different for attendants and non-attendants, include promotion research costs, differences between implicit and explicit costs, interpretation of prices according to prior expectations, the influence of other channels such as mass media or word of mouth, recall of the latest price paid and, finally, protest responses, as in our case the origin of the price change is a tax increase. Moreover, for those who are more affected by these external factors, we find that declared valuations of prices are not consistent with observed consumption decisions. Behavior involves a more reflective and deliberative way of thinking that helps set aside external factors and places the focus back on real prices. Therefore, the real behavior is more consistent with rationality than are price declarations.