Blinded by worries: sin taxes and demand for temptation under financial worries

• DOI: 10.1007/s11238-021-09820-5
• Publication Date: 2021-06-04T19:03:06Z
• Authors: Sergiu Burlacu; Austėja Kažemekai...; Piero Ronzani; Lucia Savadori
• Keywords: Temptation; Consumption; Dynamic inconsistency

Abstract Imposing “sin” taxes has been the preferred way governments tried to discourage over-consumption of temptation goods for decades. However numerous evidence shows that consumers exhibit behavioral biases which can affect their reaction taxes. This paper investigates a potential bias and how it affects demand temptation: financial worries associated with poverty have shown shift attention towards pressing needs, often at expense forward-looking decisions. In an online experiment UK participants, we randomly induce ask participants allocate budget between basic necessities in experimental market. We impose “taxes” on by increasing its price. find that, absence any tax, inducing lowers temptation, effect stronger lower-income participants. However, when concerns are salient, tax does not lower among While might protect against changes, they also hurt poor most additional introduced.