This paper examines whether changes in price-labeling regulations affect the economic incidence of value-added taxes (VAT) even when statutory tax rates remain unchanged. Unlike previous studies that rely on VAT rate changes, I exploit Japan's 2021 mandatory tax-inclusive labeling reform, which changed price-display rules while leaving VAT rates unchanged, thereby isolating the salience channel of VAT incidence. Using daily point-of-sale (POS) data covering 639 supermarket products, I document anticipatory pricing in the form of a temporary decline in tax-exclusive prices before the reform. The adjustment is concentrated in minimum (promotional) prices, while maximum (regular) prices remain largely unchanged. A within-product difference-in-differences specification and an independent shelf-price dataset support the identification strategy. Additional evidence shows that products with stronger focal-pricing tendencies exhibited smaller pre-reform price reductions, suggesting that behavioral pricing constrained firms' responses. These findings demonstrate that changes in price-labeling regulations can temporarily alter effective VAT incidence even without statutory tax changes.

We examine the conditions under which changes in value-added taxes lead to price adjustments in products not directly affected by the tax change. We exploit a large and exogenous VAT cut on menstrual products in Germany in 2020 and estimate the pass-through to prices and pricing spillovers on complementary products for which the VAT rate remained unchanged. We use a unique data set of daily prices of 5,000 hygiene products from the online shop of a large German supermarket chain. We document bundling effects as producers of menstrual products fully passed on the VAT cut to prices but significantly increased prices of unaffected complementary feminine hygiene products by 5 to 10 percentage points with no sign of phasing out after more than one year. Producers of panty liners that do not offer products affected by the VAT cut did not adjust prices.

We study how VAT cuts propagate through production networks. Using a large reform in Brazil and transaction-level administrative tax data, we trace effects on prices and quantities along the supply chain. Difference-indifferences estimates reveal overshifting in distributor prices, indicating that upstream firms absorb part of the tax cut. We interpret these findings through a model of imperfect competition in a vertically linked network. Structural estimates show that the tax cut compresses upstream markups, amplifying pass-through to consumers. Our results challenge the classical VAT neutrality benchmark and the view that incidence can be summarized by consumer market elasticities alone.

Despite widespread evidence of consumer inattention and salience effects on prices and consumer demand, little is known about the degree to which “drip” pricing contributes to firm profitability. In this paper, we study investor reactions to several regulatory, legislative, and litigation events intended to limit drip pricing in order to quantify “inattention rents.” Inattention rents differ from ordinary economic rents in that they may even arise in perfectly competitive markets where consumers suffer from inattention. Mitigating inattention (e.g., by requiring advertised prices to be tax and fee inclusive) results in a transfer of surplus from producers to consumers while curbing overconsumption. The announcement of final rules requiring airlines to advertise tax-inclusive prices in the U.S. imply 3-day cumulative abnormal returns of -4% among domestic U.S. carriers, whereas foreign carriers were minimally affected. Proposed legislation related to other forms of drip pricing and targeted litigation have more muted effects.