TITLE Tax Salience and Attention Variation: Evidence from a Natural Experiment
AUTHORS Shinri Ishida

Yokohama City University

Yoshiyuki Nakazono

Graduate School of International Management, Yokohama City University
Graduate School of Economics and Management, Tohoku University


We examine the salient effects of posting tax-inclusive price tags on demand. We discover attention variation among consumers with only less-educated consumers underreacting to the not-fully-salient tax display. We also find that a change in price tag displays to tax-exclusive prices induces consumers to visit such 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, not permanent, phenomenon.

KEYWORDS consumption tax; rational inattention; store choice; store patronage; tax salience; value-added tax
ISSUED August 2022

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