ECONOMICS OF INFORMATION
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1 ECONOMICS OF INFORMATION
2 SOCIAL DIMENSIONS OF ECONOMICS A series of books sponsored by the Department of Economics, The City College of the City University of New York
3 ECONOMICS OF INFORMATION MALCOLM GALATIN ROBERT D. LEITER EDITORS MARTINUS NUHOFF PUBLISHING BOSTON / THE HAGUE / LONDON
4 Distributors for Nortb America: Martinus Nijhoff Publishing Kluwer Boston, Inc. 190 Old Derby Street Hingham, Massachusetts 02043, U.S.A. Distributors outside North America: Kluwer Academic Publishers Group Distribution Centre P.O. Box AH Dordrecht, The Netherlands Library of Congress Cataloging in Publication Data Main entry under title: Economics of information. (Social dimensions of economics) Include bibliographical references. 1. Information theory in economics-congresses. I. Galatin, Malcolm. II. Leiter, Robert David, III. Series. HB133.E '9' ISBN-13: e-isbn-13: DOl: / Copyright 1981 by Martinus Nijhoff Publishing No part of this book may be reproduced in any form by print, photoprint, microfilm, or any other means without written permission from the publisher.
5 Preface On May 20, 1976, the Economics Department of the City College of the City University of New York held its fourth annual conference. Eight papers followed by eight comments were delivered on the topic of "Economics of Information." These papers and comments are published in this volume along with a brief introduction. This publication has been made possible by income from the Harry Schwager Fund. My colleagues in the Economics Department have been generous when called upon to read and evaluate the papers. Professor Morris Silver, chairman of the department, was helpful at each stage of the project. Bob Leiter, my colleague and joint editor of these papers, died on August 19, 1976, while we were in the process of editing this volume. He was instrumental in organizing the Economics Department's annual conferences from their beginning in 1973 and for editing or jointly editing the conference volumes. The Economics Department's Memorial Resolution, which follows, best expresses our sense of loss at his premature death. MALCOLM GALA TIN The City College of the City University of New York 5
6 Contents Preface 5 Memorial Resolution for Professor Robert D. Leiter 9 Introduction by Malcolm Galatin Information and Product Differentiation by Kelvin J. Lancaster 17 Notes and References 35 Comments on "Information and Product Differentiation" by Roger A. McCain Consumer Information and Advertising by Phillip J. Nelson 42 Appendixes, Notes, and References 69 Comments on "Consumer Information and Advertising" by Roger E. A1caly Search, Information, and Market Structure by Malcolm Galatin 83 Appendix and References 96 Comments on "Search, Information, and Market Structure" by Barry Bressler 98 7
7 8 ECONOMICS OF INFORMATION 4. Adaptations to Information Impactedness: A Survey by Morris Silver 104 Notes and References 114 Comments on "Adaptations to Information Impactedness: A Survey" by Alvin Marty The Cost of Labor Market Information: Male Youth Job Search Behavior by Stanley P. Stephenson, Jr. 123 Appendix and References 138 Comments on "The Cost of Labor Market Information: Male Youth Job Search Behavior" by Stanley L. Friedlander Economic Aspects of Information on Health and Health Care by Charlotte F. Muller 146 Notes 169 Comments on "Economic Aspects of Information on Health and Health Care" by Gerald Sirkin Tradition and Innovation: Some Economics of the Creative Arts, Science, Scholarship, and Technical Development by Roger A. McCain 173 Notes and References 202 Comments on "Tradition and Innovation... " by Edwin P. Reubens "Strategic Mind Set" and the Assessment of Information in Serious Games by Peter S. Albin 209 Notes, References, and Appendixes 227 Comments on "'Strategic Mind Set' and the Assessment of Information in Serious Games" by Malcolm Galatin 256
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