Shipping the Good Apples Out: A New Perspective
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.
Volume (Year): 42 (2004)
Issue (Month): 3 (July)
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