Econometrica: Jul 1960, Volume 28, Issue 3

A Statistical Model of the Gross Analysis of Transaction Flows

https://doi.org/0012-9682(196007)28:3<551:ASMOTG>2.0.CO;2-C
p. 551-572

I. Richard Savage, Karl W. Deutsch

This model is applicable to the flow of any kind of quantifiable transactions, and to matrices from three to more than one hundred actors, utlizing a 650 IBM electronic computer or similar equipment. The method develops a matrix of expected or baseline data from assumptions of complete indifference among the actors, and the actual amount of transactions in each direction for every pair of actors. It thus removes gross size effects and permits tentative inferences amount the distribution of preferences among pairs of larger groups of actors; about degrees of clustering or integration among actors; and about changes over time, if several matrices are used. It thus locates interesting pairs or groups for futher study. Import-export data are used as an example to show the detailed application of the method. For a given year and a group of countries, the import-export data can be arranged like a contingency table, except the diagonal cells are zero andthe ogerh entries are quantities of money, a continuous variable instead of a discrete variable. A model describing the data and techniques for the statitsitcal analysis are presented. This is a "null model" in the sense that the departures frm it are primary interest. The North Atlantic Area (1928) is used as an illustration.

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