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Shipping the Good Apples Out: Alchian-Allen Theorem of Various Qualities

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  • Saito, Tetsuya

Abstract

This paper explores conditions for which Alchian-Allen theorem–the finer quality product is relatively more purchased than the lower one in regions where additional costs are imposed–holds in models of various but finite qualities. In this paper, “finer qualities raise ratios to lower ones in response to transportation costs” defines the various qualities version of Alchian-Allen theorem. Then we find Alchian-Allen theorem holds if and only if consumptions of neighbor qualities are not so different and weighted averages of compensated elasticities by inverse of prices are decreasing in qualities. In order to provide plausible intuitions, some sufficiency conditions are also suggested.

Suggested Citation

  • Saito, Tetsuya, 2006. "Shipping the Good Apples Out: Alchian-Allen Theorem of Various Qualities," MPRA Paper 883, University Library of Munich, Germany, revised 20 Nov 2006.
    • Handle: RePEc:pra:mprapa:883
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    References listed on IDEAS

    as
    1. Irwin, Douglas A. & Temin, Peter, 2001. "The Antebellum Tariff On Cotton Textiles Revisited," The Journal of Economic History, Cambridge University Press, vol. 61(3), pages 777-798, September.
    2. Peter Temin, 1988. "Vertical Integration and Product Quality in the Early Cotton Textile Industry," Working papers 481, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Peter Temin, 1988. "Vertical Integration and Product Quality in the Early Cotton Textile Industry," Working papers 477, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Temin, Peter, 1988. "Product Quality and Vertical Integration in the Early Cotton Textile Industry," The Journal of Economic History, Cambridge University Press, vol. 48(4), pages 891-907, December.
    5. Jonathan B. Pritchett & Richard M. Chamberlain, 1993. "Selection in the Market for Slaves: New Orleans, 1830–1860," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 461-473.
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    Cited by:

    1. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.

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    More about this item

    Keywords

    Alchian-Allen theorem; various qualities; substitution effect; fixed transportation cost;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • F19 - International Economics - - Trade - - - Other

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