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LT W1: Incidence (Partial Equilibrium Incidence (Deviations (Tax Salience,…

- - - - #1: Inattention leads to a more inelastic behavioural response. This increases incidence on the inattentive group.
      - #2: Salience/information frictions can break the classic result that statutory incidence is rrelevant for economic incidence.
        Intuitively,
        
        If consumers were remitting the tax themselves (i.e. they have statutory incidence), they would be more attentive
        
        Thus, they would be more elastic, and there is less economic incidence
        
        In other words, statutory incidence can affect economic incidence contrary to theory
      - Under previous assumptions, consumers are perfectly salient (i.e. attentive) regarding taxes. However, empirical studies have shown that tax salience does not exist in reality.
    - - In perfect competition, equilibrium is efficient, and introducing taxes/mandating prices can only reduce equilibrium quantities.
      - In imperfect competition, equilibrium is inefficient. Thus, pre-existing incidencies affect the incidence of policies.
        
        Mandating prices (e.g. minimum wage in labour market) may increase both prices and quantities
      - Manning (2003): Search frictions can give firms monopsony power