Abstract
A law‐of‐demand explanation to the Alchian‐Allen, or “shipping the good apples out,” proposition rests on a change in the relative price of quality when a unit fee is introduced. However, the manner in which quality is consumed is crucial. In some cases, for instance, there is no substitution between the quality attribute and the priced, quantity‐measured attribute. This paper shows that in these cases the relative price of quality is unchanged by a unit fee. Nevertheless, while the “unit fee” proposition fails to obtain for individual choice, it does hold in aggregate.
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