Working Paper
The impact of tax exclusive and inclusive prices on demand
Abstract: 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.
Access Documents
File(s): File format is text/html http://www.federalreserve.gov/pubs/feds/2012/201250/201250abs.html
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/feds/2012/201250/201250pap.pdf
Authors
Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: Finance and Economics Discussion Series
Publication Date: 2012
Number: 2012-50