Hidden baggage behavioral responses to changes in airline ticket tax disclosure Sebastien Bradley, Naomi E. Feldman
By: Bradley, Sebastien
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Contributor(s): Feldman, Naomi E.
Material type: 
ArticlePublisher: 2020Subject(s): LINEAS AEREAS | TRANSPORTES AEREOS | IMPUESTOS | PRECIOS | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 12, n. 4, November 2020, p. 58-87Summary: We examine the impact of a January 2012 enforcement action by the US Department of Transportation that required US air carriers and online travel agents to modify their web interfaces to incorporate all ticket taxes in up-front, advertised fares. We show that the more prominent display of tax-inclusive prices is associated with significant reductions in consumer tax incidence, demand, and ticket revenues along more heavily taxed itineraries. In particular, the fraction of unit taxes that airlines passed onto consumers fell by roughly 75 cents for every dollar of tax. These results present evidence of consumer inattention in a novel institutional setting featuring quasi-experimental variation in tax salience, economically significant tax amounts, and endogenous price responses.
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| OP 2135/2020/4 American Economic Journal : Economic Policy | OP 2135/2020/4-1 Child care subsidies, quality, and optimal income taxation | OP 2135/2020/4-2 How taxing is tax filing? | OP 2135/2020/4-3 Hidden baggage | OP 2135/2020/4-4 Discrete prices and the incidence and efficiency of excise taxes | OP 2135/2020/4-5 Optimal income taxation with present bias | OP 2135/2021/1 American Economic Journal : Economic Policy |
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We examine the impact of a January 2012 enforcement action by the US Department of Transportation that required US air carriers and online travel agents to modify their web interfaces to incorporate all ticket taxes in up-front, advertised fares. We show that the more prominent display of tax-inclusive prices is associated with significant reductions in consumer tax incidence, demand, and ticket revenues along more heavily taxed itineraries. In particular, the fraction of unit taxes that airlines passed onto consumers fell by roughly 75 cents for every dollar of tax. These results present evidence of consumer inattention in a novel institutional setting featuring quasi-experimental variation in tax salience, economically significant tax amounts, and endogenous price responses.
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