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Some Evidence on the Alchian and Allen Theorem: The Third Law of Demand?

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Author Info

  • Bertonazzi, Eric P
  • Maloney, Michael T
  • McCormick, Robert E

Abstract

This paper examines empirically the proposition of Armen Alchian and William Allen (1964) that shipping charges induce consumers to opt for higher quality goods. The authors show, in a household productions framework, why this holds whether goods or buyers travel. Using a large sample of individual consumption data for football games, they find that buyers who travel the farthest, purchase the best tickets. In the end, the authors believe that the Alchian and Allen theorem is so broad and pervasive that it qualifies as the third law of demand. Copyright 1993 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 31 (1993)
Issue (Month): 3 (July)
Pages: 383-93

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Handle: RePEc:oup:ecinqu:v:31:y:1993:i:3:p:383-93

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Citations

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Cited by:
  1. Robert Lawson & Lauren Raymer, 2006. "Testing the Alchian-Allen Theorem: A Study of Consumer Behavior in the Gasoline Market," Economics Bulletin, AccessEcon, vol. 4(35), pages 1-6.
  2. Karp, Larry S. & Perloff, Jeffrey M, 2003. "When promoters like scalpers," CUDARE Working Paper Series 916R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  3. Minagawa, Junichi & Upmann, Thorsten, 2013. "A conditional demand approach to the Alchian–Allen effect," Economics Letters, Elsevier, vol. 120(3), pages 546-551.
  4. T Nesbit, 2007. "Excise Taxation and Product Quality: The Gasoline Market," Economic Issues Journal Articles, Economic Issues, vol. 12(2), pages 1-14, September.
  5. Liu, Liqun, 2011. "The Alchian-Allen theorem and the law of relative demand: The case of multiple quality-differentiable brands," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 52-57, January.
  6. repec:ebl:ecbull:v:4:y:2006:i:35:p:1-6 is not listed on IDEAS
  7. Minagawa, Junichi & Upmann, Thorsten, 2013. "A note on parental time allocation," Labour Economics, Elsevier, vol. 25(C), pages 153-157.
  8. James, Jennifer S., 1999. "Endogenous Quality And Agricultural Policy Analysis," 1999 Annual meeting, August 8-11, Nashville, TN 21634, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Robert Lawson & Todd Nesbit, 2013. "Alchian and Allen Revisited: Law Enforcement and the Price of Weed," Atlantic Economic Journal, International Atlantic Economic Society, vol. 41(4), pages 363-370, December.
  10. Daniel Bunting & Kevin J. Fox, 2014. "The Impact of Quarantine Policies on the Quality of Imports," Discussion Papers 2014-01, School of Economics, The University of New South Wales.
  11. Matthew T. Brown & Daniel A. Rascher & Chad D. McEvoy & Mark S. Nagel, 2007. "Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand," International Journal of Sport Finance, Fitness Information Technology, vol. 2(1), pages 45-53, February.
  12. Junichi Minagawa & Thorsten Upmann, 2012. "The Generalized Alchian-Allen Theorem," CESifo Working Paper Series 3969, CESifo Group Munich.
  13. Minagawa, Junichi, 2012. "On Giffen-like goods," Economics Letters, Elsevier, vol. 115(2), pages 282-285.
  14. Tetsuya Saito, 2008. "An Expository Note on Alchian-Allen Theorem When Sub-Utility Functions are Homogeneous of Degree n > 0 with Two-Stage Budgeting," Economics Bulletin, AccessEcon, vol. 6(30), pages 1-12.
  15. Todd M. Nesbit, 2005. "Excise Taxation and Product Quality: The Gasoline Market," Working Papers 05-11 Classification-, Department of Economics, West Virginia University.
  16. repec:ebl:ecbull:v:6:y:2008:i:30:p:1-12 is not listed on IDEAS
  17. Saito, Tetsuya, 2007. "Shipping the Good Apples Out: Another Proof with A Graphical Representation," MPRA Paper 1297, University Library of Munich, Germany.

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