Tax policy

The effectiveness of tax policy depends on whether sellers pass on changes in tax rates to consumers through changes in price. In new research, Felix Montag, Robin Mamrak, Alina Sagimuldina, and Monika Schnitzer investigate how this tax pass-through in turn depends on how much consumers know about prices. They show that if consumers are not aware of how prices for the same product vary between sellers, then they will be unaffected by tax changes intended to increase or decrease consumption.