An Expository Note on Alchian-Allen Theorem When Sub-Utility Functions are Homogeneous of Degree n ą 0
AbstractThis 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 6442.
Date of creation: 21 Dec 2007
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Fixed transaction cost; quality of goods; Alchian-Allen Theorem; change in consumption pattern;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
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- 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.
- Gould, John P & Segall, Joel, 1969. "The Substitution Effects of Transportation Costs," Journal of Political Economy, University of Chicago Press, vol. 77(1), pages 130-37, Jan./Feb..
- 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 131-38, February.
- 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.
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