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Shipping the Good Apples Out: A New Perspective

Author

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  • Yoram Bauman

Abstract

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.

Suggested Citation

  • Yoram Bauman, 2004. "Shipping the Good Apples Out: A New Perspective," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 534-536, July.
    • Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:534-536
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    File URL: http://hdl.handle.net/10.1093/ei/cbh079
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    Citations

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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.
    2. Ramos, Maria Priscila & Bureau, Jean-Christophe & Salvatici, Luca, 2007. "Shipping the good beef out: EU trade liberalization to Mercosur exports," Working Papers 7215, TRADEAG - Agricultural Trade Agreements.
    3. Junichi Minagawa & Thorsten Upmann, 2012. "The Generalized Alchian-Allen Theorem," CESifo Working Paper Series 3969, CESifo.
    4. Minagawa, Junichi & Upmann, Thorsten, 2013. "A note on parental time allocation," Labour Economics, Elsevier, vol. 25(C), pages 153-157.
    5. Markus Lampe & Paul Sharp, 2014. "Greasing the wheels of rural transformation? Margarine and the competition for the British butter market," Economic History Review, Economic History Society, vol. 67(3), pages 769-792, August.
    6. Jean Eid & Travis Ng & Terence Tai-Leung Chong, 2013. "Shipping the Good Horses Out," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 540-561, October.
    7. Liu, Liqun, 2011. "The Alchian-Allen theorem and the law of relative demand: The case of multiple quality-differentiable brands," Mathematical Social Sciences, Elsevier, vol. 61(1), pages 52-57, January.
    8. repec:ebl:ecbull:v:6:y:2008:i:30:p:1-12 is not listed on IDEAS
    9. Minagawa, Junichi & Upmann, Thorsten, 2013. "A conditional demand approach to the Alchian–Allen effect," Economics Letters, Elsevier, vol. 120(3), pages 546-551.
    10. Minagawa, Junichi, 2012. "On Giffen-like goods," Economics Letters, Elsevier, vol. 115(2), pages 282-285.
    11. Matthew T. Brown & Daniel A. Rascher & Chad D. McEvoy & Mark S. Nagel, 2007. "Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand," International Journal of Sport Finance, Fitness Information Technology, vol. 2(1), pages 45-53, February.
    12. Pramesti Resiandini, 2014. "Japanese and Korean automobile exports and the Alchian-Allen theorem," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 7(1), pages 86-98.
    13. Carter, Colin A. & Chalfant, James A. & Yavapolkul, Navin & Carroll, Christine L., 2016. "International commodity trade, transport costs, and product differentiation," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 65-76.
    14. Saito, Tetsuya, 2007. "Shipping the Good Apples Out: Another Proof with A Graphical Representation," MPRA Paper 1297, University Library of Munich, Germany.
    15. Danilo Pelletiere & Kenneth A. Reinert, 2006. "World Trade in Used Automobiles: A Gravity Analysis of Japanese and US Exports," Asian Economic Journal, East Asian Economic Association, vol. 20(2), pages 161-172, June.
    16. Tetsuya Saito, 2008. "An Expository Note on Alchian-Allen Theorem When Sub-Utility Functions are Homogeneous of Degree n > 0 with Two-Stage Budgeting," Economics Bulletin, AccessEcon, vol. 6(30), pages 1-12.

    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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