Tax Salience and Attention Variation

Abstract

We examine the salient effects of tax information on demand. We discover attention variation among consumers with less-educated consumers misreacting to the not-fully-salient tax display. We also find that a change in price tag displays to tax-exclusive prices induced consumers to visit these stores more often than before. More than half of the increase in demand in the stores using the tax-exclusive price tags is accounted for by changing regular stores, which implies that the less salient tax price display influences store patronage. However, our results suggest that the salient effect is a short-lived, non-permanent, phenomenon. JEL Classification: D12; D25; H71