26 Pages Posted: 17 Dec 2014
Date Written: December 15, 2014
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: 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