No abstract

A local consumer market is informationally imperfect and welfare‐reducing to the extent that it is characterized by extensive price dispersion unexplained by utility‐conferring properties of the product. This article reports a study to ascertain the extent of informational imperfections for 17 representative products in Syracuse, New York. Except for food, most products exhibited extensive and welfare‐reducing price dispersion. The article also reports on a pilot investigation of consumers' perceptions, finding them to be mostly inaccurate (except for food) and typically underestimated. The study findings suggest that consumers are both victims of and contributors to informationally imperfect markets. The paper concludes with a discussion of policy implications.

When response errors are studied by means of record checks, the possibility exists that matching errors are made in relating responses to the corresponding record data. Two simple models are developed for matching errors, and the implications of such matching errors on various measures of response errors are studied. The models are applied to the data from a record check study, and it is found that relatively small imperfections in the matching process can lead to substantial bias in estimating the relationship between response errors and "true" values.

This article deals with the use and misuse of the correlation coefficient when the dependent variable is of a dichotomous 0,l nature. It focuses particularly on problems relating to curvilinearity and the nature of the prediction being made. The prediction of consumer purchases from reported subjective probabilities provides a vehicle for illustrating problems discussed.It is noted that with a 0,l dependent variable, the correlation ratio is likely to be a better measure of the degree of relationship than the coefficient of determination because it is free of restrictions on the functional form of the relationship. The article then considers the mean error probability and the average conditional entropy aa alternative measures. Finally, the article emphasizes that the purpose for using the relation between the independent and dependent variable should govern the development of an appropriate model and the measure to be used for deciding which of several independent variables is best.