Salience and taxation: salience effect versus information effect

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 utilizi...

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Bibliographic Details
Published inApplied economics letters Vol. 20; no. 5; pp. 508 - 510
Main Authors Zheng, Yuqing, McLaughlin, Edward W., Kaiser, Harry M.
Format Journal Article
LanguageEnglish
Published Taylor & Francis 01.03.2013
Subjects
Consumer behaviour
Demand
information effect
sales tax
Sales taxes
salience effect
Taxation
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Summary: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.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
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ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2012.718050