Price as a signal of quality: Canada in the international context

Studies have shown that price is very poorly correlated with quality. This paper discusses the methodological criticisms of the earlier work, concluding that the original results remain robust. Examination of 91 sets of Canadian products containing 1020 items reinforces the conclusions of earlier work for the United States and Japan. These international studies contradict the conventional wisdom that price is an adequate signal of quality. We also test the hypotheses that price is a better signal of quality (a) after product tests have been published, and (b) for higher priced items which presumably justify larger investments in search. Canadian data do not support either hypothesis. Some theoretical explanations are outlined and a conclusion briefly presents implications for policy.

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Der Preis als Qualitätsindikator: Kanadische und internationale Befunde

Zusammenfassung Zahlreiche Untersuchungsergebnisse haben gezeigt, daß Preis und Qualität in einem nur sehr dürftigen Zusammenhang stehen. Diese Befunde sind unter methodischem Gesichtspunkt kritisiert worden, der vorliegende Beitrag versucht jedoch zu zeigen, daß die Befunde robust sind und der Kritik standhalten können. Eine Untersuchung der Autoren anhand von 91 kanadischen Warentests mit 1,020 Artikeln bestätigt darüberhinaus die früheren Ergebnisse aus den Vereinigten Staaten und Japan. Insgesamt widersprechen diese internationalen Untersuchungen der herkömmlichen Ansicht, daß der Preis eines Gutes ein angemessener Qualitätsindikator sei.Darüber hinaus prüft die Studie der Autoren die Hypothese, daß der Preis ein besserer Qualitätsindikator ist, (a) nachdem Warentests durchgeführt und die Ergebnisse publiziert wurden, und (b) wenn es sich um teurere Produkte handelt, die vermutlich einen höheren Suchaufwand rechtfertigen. Beide Hypothesen werden durch kanadische Daten nicht gestützt. Abschließend werden einige verbraucherpolitische Implikationen dieser Befunde behandelt.The authors are grateful to referees for important assistance.

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Richard W. Bodell is Assistant Professor and Robert R. Kerton is Professor in the Department of Economics at the University of Waterloo, Waterloo, Ontario, Canada N2L 3G1. Richard W. Schuster is an economist with the Economics Department of the Bank of Nova Scotia in Toronto.     

Force and Influence in Content Analysis: The Production of New Social Knowledge

We examine the two traditions of content analysis: the first in which one substitutes words of a text with categories, and the second in which one looks for clusters of words that may refer to a theme. In the first tradition, preexisting dictionary categories give meaning to the words; in the second, meaning comes after the fact. Preexisting dictionary categories (the substitution model) are calibrated instruments applied within experimental designs that leave no space for doubt; meanwhile, the ability of the correlational model to conjure up complex themes from fragments of a text yields no unique solution. These differences have bearings on the production of new social knowledge. We expound on the epistemological foundations of the two traditions of interpretation and draw from them decision rules upon which one may rely for choosing among appropriate content-analytic tactics. Two reasons make this essay timely and critical: (1) the increasing variety of new content-analyticsoftware for particular purposes and (2) the almost exclusive focusing on software and technology at the expense of adjusting the choice of the software to the nature of the text. Two studies, one in historiometry, the other in autobiography, illustrate the liabilities and benefits of the two models of content analysis.     

Integration of collective bargaining and formal worker participation processes: Boon or barrier to worker rights?

Many employers are extending workplace rights by allowing for more employee voice in decision making. Numerous unionized organizations have established formal worker participation processes to help achieve this end and to improve organizational performance. Based largely on theory, such processes are normally designed to operate independently from the bargaining process. The purpose of this study was to examine the relationship between participation and bargaining processes, and the effect of this relationship on workplace satisfaction. A total of 712 Midwest union officials were surveyed, and the results indicate that the processes tend to become integrated in the workplace. Further, union officials' workplace satisfaction was greater where formal worker participation is institutionalized within the bargaining process.     

Structuring Corporate Headquarters: An Investigation of Franchising

This article focuses on the structuring of the corporate headquarters in a franchise organization. Four essential issues that are related to franchisors organizational structure are discussed—homogeneity and heterogeneity of franchisors structure, company-owned and franchise arrangement, the dynamics between strategy and structure, and performing innovative and administrative functions simultaneously in the headquarters. Propositions are given for each issue. The results of qualitative analysis associated with each issue are discussed.     

On estimating the mean of the selected normal population under the LINEX loss function

Following Parsian and Farsipour (1999), we consider the problem of estimating the mean of the selected normal population, from two normal populations with unknown means and common known variance, under the LINEX loss function. Some admissibility results for a subclass of equivariant estimators are derived and a sufficient condition for the inadmissibility of an arbitrary equivariant estimator is provided. As a consequence, several of the estimators proposed by Parsian and Farsipour (1999) are shown to be inadmissible and better estimators are obtained. Received January 2001/Revised May 2002     

Information value and efficiency measurement for risk-averse firms

This paper has three goals. First, we demonstrate that standard arguments and methods from production and duality analysis can be used to provide a comprehensive and general treatment of the value of information for a risk-averse firm with expected-utility (linear-in-probabilities) preferences and a general stochastic technology. Second, we place bounds on the value of information for a risk-averse firm and relate these bounds to characteristics of the technology and the producer’s preferences. The third and final goal is to derive the implications that information differences can have for measured efficiency differences and to relate the bounds on the value of information to those measured differences.      

Inter-market competition for exchange traded funds

We examine how the different mix of informed and liquidity trading in the market for ETFs affects the nature of inter-market competition. We find that both the characteristics of the securities and the structures of the competing markets jointly determine the nature of inter-market competition. Given the superior execution quality on the ECNs and the low adverse selection costs in the ETF market, anonymous market such as the ECNs, attract both liquidity and informed traders. We also find that markets compete in a subset of ETFs. In addition, we find that quotebased competition is prevalent in the market for ETFs.