Information and Food Prices

This paper uses a model of search to derive testable hypotheses about the relationships among the distributions of prices which prevail in areas whose residents have different income levels. The hypotheses are examined by using data obtained from a comprehensive survey of food prices conducted in New York City during the summer of 1967. As expected on the basis of the theoretical analysis the partial elasticity of search for lower prices of the ith commodity by residents of the jth regions with respect to the income of the residents of region j was found to be an increasing function of the income elasticities of the various commodities, even when search activity is approximated by the means and standard deviations of prevailing prices.