Shipping the Good Horses Out

Jean Eid, Travis Ng and Terence Tai Leung Chong

Southern Economic Journal, 2013, vol. 80, issue 2, 540-561

Abstract: The effect states that when a fixed per‐unit cost is added to two substitutes, the more expensive (higher quality) one becomes relatively cheaper, and, thus, its consumption will increase. When applied to trade in vertically‐differentiated goods, the importing regions demand relatively more high‐quality goods. We examine how this result changes when the importing region is also endowed with the goods. We use a vertically‐differentiated goods model with heterogeneous consumers in which prices are endogenously determined. We show that the importing regions with an endowment have a stronger Alchian‐Allen effect than the regions that are not endowed. We use the auction data of Australian thoroughbred yearlings to empirically test our model and find consistent empirical patterns.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.4284/0038-4038-2012.038

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:80:y:2013:i:2:p:540-561

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().