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THE EFFECT OF UNIT FEES ON THE CONSUMPTION OF QUALITY
Author(s) -
KAEMPFER WILLIAM H.,
BRASTOW RAYMOND T.
Publication year - 1985
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1985.tb01769.x
Subject(s) - unit (ring theory) , quality (philosophy) , economics , consumption (sociology) , unit price , proposition , microeconomics , unit of account , substitution (logic) , aggregate (composite) , econometrics , computer science , monetary economics , mathematics , social science , philosophy , programming language , materials science , mathematics education , epistemology , currency , sociology , composite material
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.