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Shipping the Good Apples Out: A New Perspective

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  • Yoram Bauman
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    Abstract

    An alternative explanation is provided for the Alchian and Allen substitution theorem, which posits that a per unit tax or shipping fee applied to similar goods will increase the relative consumption of the higher-quality good. The usual explanation is that consumers substitute out of "bad apples" and into "good apples." This article generalizes the Alchian and Allen result in an n-good world, providing an alternative explanation that is more cogent in situations where the two goods (for example $500 and $5 wines) are not close substitutes. (JEL D40) Copyright 2004, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/ei/cbh079
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    Bibliographic Info

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

    Volume (Year): 42 (2004)
    Issue (Month): 3 (July)
    Pages: 534-536

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    Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:534-536

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    Cited by:
    1. Matt, Brown & Daniel, Rascher & Chad, McEvoy & Mark, Nagel, 2007. "Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand," MPRA Paper 25830, University Library of Munich, Germany.
    2. Junichi Minagawa & Thorsten Upmann, 2012. "The Generalized Alchian-Allen Theorem," CESifo Working Paper Series 3969, CESifo Group Munich.
    3. repec:ebl:ecbull:v:6:y:2008:i:30:p:1-12 is not listed on IDEAS
    4. Saito, Tetsuya, 2007. "Shipping the Good Apples Out: Another Proof with A Graphical Representation," MPRA Paper 1297, University Library of Munich, Germany.
    5. Minagawa, Junichi, 2012. "On Giffen-like goods," Economics Letters, Elsevier, vol. 115(2), pages 282-285.
    6. Minagawa, Junichi & Upmann, Thorsten, 2013. "A conditional demand approach to the Alchian–Allen effect," Economics Letters, Elsevier, vol. 120(3), pages 546-551.
    7. Markus Lampe & Paul Sharp, 2013. "Greasing the Wheels of Rural Transformation? Margarine and the Competition for the British Butter Market," Working Papers 0043, European Historical Economics Society (EHES).
    8. Ramos, Maria Priscila & Bureau, Jean-Christophe & Salvatici, Luca, 2007. "Shipping the good beef out: EU trade liberalization to Mercosur exports," Working Papers 7215, TRADEAG - Agricultural Trade Agreements.
    9. 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.
    10. Minagawa, Junichi & Upmann, Thorsten, 2013. "A note on parental time allocation," Labour Economics, Elsevier, vol. 25(C), pages 153-157.

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