On the Third Law of Demand
Document Type
Article
Journal/Book Title/Conference
Economic Inquiry
Volume
41
Publication Date
2003
First Page
292
Last Page
298
Abstract
The Alchian and Allen theorem predicts that it will be harder to find “good” apples in the State of Washington, a prime apple‐growing region, than in, say, New York City, where the addition of shipping charges makes “bad” apples comparatively more expensive. We recast the theorem as a testable proposition by explicitly taking the supply side into account and identifying plausible scenarios in which a fixed cost either has no effect on the relative prices of high and low quality grades of the same good in distant markets or, indeed, causes more of the bad apples to be shipped out.
Recommended Citation
On the Third Law of Demand” (with Laura Razzolini and Robert D. Tollison), Economic Inquiry 41 (April 2003), pp. 292–298.
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