Left-Digit Bias: Theory and Empirical Evidence from a Tax Salience Experiment

Demand often drops sharply at whole-dollar prices. To explain this phenomenon, known as left-digit bias, we develop a random utility model in which consumers consider a good only if its price is below a heterogeneous attention threshold. Masses of consumers with integer attention thresholds generate demand discontinuities. When a tax is introduced, the model predicts a weaker demand response compa

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