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Some Evidence on the Alchian and Allen Theorem: The Third Law of Demand?

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  • Bertonazzi, Eric P
  • Maloney, Michael T
  • McCormick, Robert E

Abstract

This paper examines empirically the proposition of Armen Alchian and William Allen (1964) that shipping charges induce consumers to opt for higher quality goods. The authors show, in a household productions framework, why this holds whether goods or buyers travel. Using a large sample of individual consumption data for football games, they find that buyers who travel the farthest, purchase the best tickets. In the end, the authors believe that the Alchian and Allen theorem is so broad and pervasive that it qualifies as the third law of demand. Copyright 1993 by Oxford University Press.

Suggested Citation

  • Bertonazzi, Eric P & Maloney, Michael T & McCormick, Robert E, 1993. "Some Evidence on the Alchian and Allen Theorem: The Third Law of Demand?," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 383-393, July.
    • Handle: RePEc:oup:ecinqu:v:31:y:1993:i:3:p:383-93
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    References listed on IDEAS

    as
    1. Kaempfer, William H & Brastow, Raymond T, 1985. "The Effect of Unit Fees on the Consumption of Quality," Economic Inquiry, Western Economic Association International, vol. 23(2), pages 341-348, April.
    2. 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..
    3. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(1), pages 77-96.
    4. 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.
    5. Morey, Edward R., 1981. "The demand for site-specific recreational activities: A characteristics approach," Journal of Environmental Economics and Management, Elsevier, vol. 8(4), pages 345-371, December.
    6. Morey, Edward R. & Shaw, W. Douglass & Rowe, Robert D., 1991. "A discrete-choice model of recreational participation, site choice, and activity valuation when complete trip data are not available," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 181-201, March.
    7. 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.
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