Title: Measuring Information in the Market: An Application to Physician Services
Abstract: Ever since Stigler's [47] seminal piece on the economics of information, there has been a great deal of research investigating equilibrium in markets with imperfect information. While most of this research has been concerned with theoretically establishing the conditions under which there exists a distribution of prices in equilibrium, the field now contains a small, but growing, body of empirical research. This work has followed the suggestion of Stigler and utilized the dispersion of prices (usually the variance) as a measure of incomplete information about price, such as Stigler [47], Stigler and Kindahl [49], Pratt, Wise and Zeckhauser [44], Carlson and Pescatrice [12], Marvel [34], Mathewson [35], Cox, DeSerpa and Canby [13], Dahlby and West [14], Van Hoomissen [51], and Lach and Tsiddon [29]. There are two disadvantages to using the variance (or another measure of dispersion, such as the range) of prices as a measure of incomplete information about price. The first disadvantage, recognized by Stigler and others, is that price can vary for many reasons other than incomplete information. Thus dispersion is not a pure measure of incomplete information about prices. The second disadvantage, which has not been commonly recognized in the empirical literature, is that price dispersion encompasses incomplete information both on the part of buyers and sellers as indicated by Rothschild [45], Axell [4], Butters [9], and Telser [50], and hence fails to distinguish between these two components. In this paper we propose a method for measuring incomplete information about price which
Publication Year: 1994
Publication Date: 1994-04-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 39
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