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An Expository Note on Alchian-Allen Theorem When Sub-Utility Functions are Homogeneous of Degree n ą 0

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  • Saito, Tetsuya

Abstract

This expository note shows Alchian and Allen’s conjecture–consumers purchase fine quality relatively more than coarse one– is true under some specific conditions about homogeneity, inner solution and substitutability while allowing the influence of the income effect. In the proof, to be an exposition, I emphasize graphical representations of Alchian-Allen Theorem than algebra.

Suggested Citation

  • Saito, Tetsuya, 2007. "An Expository Note on Alchian-Allen Theorem When Sub-Utility Functions are Homogeneous of Degree n ą 0," MPRA Paper 6442, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6442
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    References listed on IDEAS

    as
    1. Gould, John P & Segall, Joel, 1969. "The Substitution Effects of Transportation Costs," Journal of Political Economy, University of Chicago Press, vol. 77(1), pages 130-137, Jan./Feb..
    2. Borcherding, Thomas E & Silberberg, Eugene, 1978. "Shipping the Good Apples Out: The Alchian and Allen Theorem Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 131-138, February.
    3. Umbeck, John, 1980. "Shipping the Good Apples Out: Some Ambiguities in the Interpretation of "Fixed Charge"," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 199-208, February.
    4. Hicks, J. R., 1975. "Value and Capital: An Inquiry into some Fundamental Principles of Economic Theory," OUP Catalogue, Oxford University Press, edition 2, number 9780198282693.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fixed transaction cost; quality of goods; Alchian-Allen Theorem; change in consumption pattern;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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