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Left-Digit Bias and Inattention in Retail Purchases: Evidence from a Field Experiment

26 Pages Posted: 17 Dec 2014  

Lydia Ashton

University of Wisconsin - Madison; University of California, Berkeley - Department of Agricultural & Resource Economics

Date Written: December 15, 2014

Abstract

Chetty, Looney and Kroft (2009) find that consumers perceive tax-salience as a price increase, i.e. sales decrease when posting tax-inclusive prices. Using data from their unique experiment, I test whether individuals display inattention to the decimal digits of the price (i.e. left-digit bias). I find a larger decrease in sales of products in which tax salience shifts the left-most digit upwards, even though the tax rate is the same for all products. This study presents new evidence on left-digit bias from a quasi-random experiment, which also suggests that this is the main channel through which tax salience affects consumers' decisions.

Keywords: Cognitive Biases, Inattention, Tax-salience, Psychology and Economics.

JEL Classification: D03, D87, I39

Suggested Citation

Ashton, Lydia, Left-Digit Bias and Inattention in Retail Purchases: Evidence from a Field Experiment (December 15, 2014). Available at SSRN: https://ssrn.com/abstract=2538816 or http://dx.doi.org/10.2139/ssrn.2538816

Lydia Ashton (Contact Author)

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

220 Giannini Hall
Berkeley, CA 94720
United States

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