Thursday, August 7, 2008

An easy experiment with interesting implications for the understanding of sales tax incentives

I propose a three condition experiment using prices and varying user information. They will be given $50 and allowed to buy certain desireable items such as drinks, snacks, stupid little toys. During the two hours the subject is there they will take valdated tests of their personality, mood, intelligence, and hand eye coordinaton. They will be told they can take a break at any time and that they could buy things. The difference between conditions will be the sales tax on the items. One will be 0%, one 7%, one 18%. The total prices including sales tax will be the same across conditions.

The amount spent will be statistically compared to the tax rate, as well as the various psychological tests. I want to see if raising the sales tax on certain items will indeed change people's buying habits. Or, just by knowing it's a tax, people will tend to disregard it since there is a sense they will get that money back in less tangible ways through government programs.

This experiment would be relatively cheap compared to functional neuroimaging, and I think more informative and useful to inform policy using empirically proven methods of government influence on economic transactions.

No comments: