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*Tyler Cowen is Associate Professor of Economics at George Mason University. Alex Tabarrok is Instructor of Economics at the University of Virginia. The authors wish to thank Thomas Borcherding, Tony Caporale, Amihai Glazer, Barbara McKieman, and five anonymous referees for useful comments. Marc Poitras deserves special thanks for his many comments and stimulating discussion of the Alchian-Allen theorem.
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GOOD GRAPES AND BAD LOBSTERS: APPLYING THE ALCHIAN AND ALLEN THEOREM
Article first published online: 28 SEP 2007
DOI: 10.1111/j.1465-7295.1995.tb01860.x
Additional Information
How to Cite
COWEN, T. and TABARROK, A. (1995), GOOD GRAPES AND BAD LOBSTERS: APPLYING THE ALCHIAN AND ALLEN THEOREM. Economic Inquiry, 33: 253–256. doi: 10.1111/j.1465-7295.1995.tb01860.x
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*Tyler Cowen is Associate Professor of Economics at George Mason University. Alex Tabarrok is Instructor of Economics at the University of Virginia. The authors wish to thank Thomas Borcherding, Tony Caporale, Amihai Glazer, Barbara McKieman, and five anonymous referees for useful comments. Marc Poitras deserves special thanks for his many comments and stimulating discussion of the Alchian-Allen theorem.
Publication History
- Issue published online: 28 SEP 2007
- Article first published online: 28 SEP 2007
- Abstract
- References
- Cited By
We consider the well-known theorem of Alchian and Allen that adding a per unit charge to the price of two substitute goods increases the relative consumption of the higher price good. The current literature misspecifies the conditions under which the theorem holds. When applying the theorem the fixed cost should be applied on a per unit basis, rather than in terms of an entry fee for consumption. We state the necessary conditions for the theorem to hold when the consumers are shipped to the goods.