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On the Third Law of Demand

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Author Info

  • Laura Razzolini
  • William F. Shughart
  • Robert D. Tollison

Abstract

The Alchian and Allen theorem predicts that it will be harder to find "good" apples in the State of Washington, a prime apple-growing region, than in, say, New York City, where the addition of shipping charges makes "bad" apples comparatively more expensive. We recast the theorem as a testable proposition by explicitly taking the supply side into account and identifying plausible scenarios in which a fixed cost either has no effect on the relative prices of high and low quality grades of the same good in distant markets or, indeed, causes more of the bad apples to be shipped out. Copyright 2003, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbg008
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Bibliographic Info

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

Volume (Year): 41 (2003)
Issue (Month): 2 (April)
Pages: 292-298

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Handle: RePEc:oup:ecinqu:v:41:y:2003:i:2:p:292-298

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Cited by:
  1. Rachael E. Goodhue & Jeffrey LaFrance & Leo K. Simon, 2009. "Wine Taxes, Production, Aging and Quality," Working Papers 2009-04, School of Economic Sciences, Washington State University.
  2. 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.
  3. Saito, Tetsuya, 2007. "Shipping the Good Apples Out: Another Proof with A Graphical Representation," MPRA Paper 1297, University Library of Munich, Germany.
  4. 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.

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