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Testing the Alchian–Allen theorem for three goods using the pseudo Poisson model

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  • Dragan Miljkovic
  • Miguel I. Gómez
  • Anupa Sharma
  • Sergio A. Puerto

Abstract

We show that the Alchian–Allen theorem holds in three‐good world. We empirically test the theorem by examining the relative demand for three quality‐differentiated coffee varieties sold globally and confirm that a common per‐unit charge increases the overall quality of coffee demanded. Our empirical specification employs the Poisson pseudo maximum likelihood method, which prevents sample selection bias when zero flows between country pairs occur and estimated parameter inconsistency when the data exhibit heteroscedasticity. This is a significant improvement compared to previous practice of using the ordinary least squares to estimate the log‐log formulation, which led to both biased and inconsistent parameter estimates.

Suggested Citation

  • Dragan Miljkovic & Miguel I. Gómez & Anupa Sharma & Sergio A. Puerto, 2019. "Testing the Alchian–Allen theorem for three goods using the pseudo Poisson model," Agricultural Economics, International Association of Agricultural Economists, vol. 50(6), pages 793-802, November.
    • Handle: RePEc:bla:agecon:v:50:y:2019:i:6:p:793-802
    DOI: 10.1111/agec.12525
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    Cited by:

    1. Dela‐Dem Fiankor & Fabio G. Santeramo, 2023. "Revisiting the impact of per‐unit duties on agricultural export prices," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1472-1492, September.
    2. Fiankor, Dela-Dem Doe, 2022. "Distance to destination and export price variation within agri-food firms," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321203, Agricultural Economics Society - AES.
    3. Dela‐Dem Doe Fiankor & Bernhard Dalheimer & Daniele Curzi & Onno Hoffmeister & Bernhard Brümmer, 2024. "Does it matter how we ship the good apples out? On specific tariffs, transport modes, and agricultural export prices," Agricultural Economics, International Association of Agricultural Economists, vol. 55(3), pages 498-514, May.

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