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MENTAL MODEL · M2898

Alchian-Allen Effect

Alchian-Allen Effect
BusinessHigh supportEconomics
Included
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

When a fixed additional cost (such as shipping) is added to two substitute goods of different quality (good apples and bad apples), the relative price of the high-quality good decreases, leading to an increase in the proportion of demand for the high-quality good. - Example: Good apples cost 10 yuan, bad apples cost 5 yuan (good is twice the price of bad). Adding 5 yuan shipping, good apples cost 15 yuan, bad apples cost 10 yuan (good is 1.5 times the price of bad). For the importing country, good apples become "cheaper". -

SCAFFOLDING EFFECT

psychology

Reduce cognitive load

Quality screening under fixed costs. - Why are exported goods always the good ones? Why do you

anchor

Anchor fast decisions

When a fixed surcharge (shipping/tax) is added to two goods of different quality, the total price of the low-priced good increases relatively, and the relative price of the high-priced good decreases, shifting demand toward the higher-quality good.

MINIMUM ACTION

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Alchian%E2%80%93Allen_effectZH · Explicit
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