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| Author: | Imkamp, H. |
| Title: | A new look at old coefficients |
| Journal: | Journal of Consumer Policy
2008 : JUN, VOL. 31:2, p.139-145 |
| Index terms: | market efficiency price theory quality |
| Language: | eng |
| Abstract: | Low price-quality correlation coefficient, mostly close to 0.2, has been a studied fact for long. This has been interpreted as informational market failure since prices don't function as valid indicators of quality. Based on the economic theory of price formation this paper argues that instead being an indicator of quality prices are an indicator of scarcity. This leads to the conclusion that workable consumer goods markets, at least as seen from consumer's point of view, should be characterized by low correlation coefficients. |
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