Journal of Policy Analysis and Management 20(4), pp. 761-769.
ISSN/ISBN: 0276-8739 DOI: Not available at this time.
Abstract: Retailers often price items at $9.99 rather than $10.00. They may do so to fool consumers into viewing the price as closer to $9.00 than to $10.00, or to signal consumers that the product is on sale (e.g., Stiving and Winer, 1997). Similarly, workers highly desire a six-figure income—a salary of $100,000 sounds much more impressive than a salary of $99,999. This paper explores related behavior by government. Suppose legislators attempt to reduce the salience of increases in the gasoline tax by avoiding moving gasoline taxes into double digits, and suppose that once taxes are moved beyond the doubledigit threshold, legislators might as well raise them a little more than just the threshold increment to compensate for the increased visibility they have incurred. Two patterns might result: relatively few states imposing a tax of exactly 10 cents, and a more general avoidance of double-digit taxes. The data confirm this pattern.
Bibtex:
@article{,
ISSN = {02768739, 15206688},
URL = {http://www.jstor.org/stable/3325784},
author = {Thomas L. Brunell and Amihai Glazer},
journal = {Journal of Policy Analysis and Management},
number = {4},
pages = {761--764},
publisher = {[Wiley, Association for Public Policy Analysis and Management]},
title = {Rational Response to Irrational Attitudes: The Level of the Gasoline Tax in the United States},
volume = {20},
year = {2001}
}
Reference Type: Journal Article
Subject Area(s): Economics