The Alchian-Allen Theorem

Alchian and Allen are the two economist who formulated (back in 1964) what is now known in the economics field as the Alchian-Allen Theorem. The theory also goes by its other nickname the travel cost theorem. What this theorem essentially states is as travel or shipping cost is attached to a good, the relative price of the high quality version of that good goes down when compared to its low quality counterpart. In other words: assume you have a high quality and low quality of the same good priced H and L, and it gets shipped to a location N at a fix shipping cost of g, then the relative price of H to L, is now (H+g)/(L+g). It is clear that at location N, the relative price of H to L is now lower. What does this imply? It implies that consumers at location N would consume more of H than L because the relative price of H is lower at that location. It works both ways too, does not matter if the consumer was the one travelling or if the good is the one being shipped.

Examples: tourists eat at nicer restaurants than locals, those who come from places farther than Blacksburg, VA will tend to buy higher quality seats when they come to see the Virginia Tech Hokies play. Japanese consumers would buy more of the unblemished mango coming from the Philippines than the slightly blemished variety. So the nicer mangoes get shipped. When I order from Amazon and I'm faced with a choice between a brand new book for $50 and a used one for $40, with a fixed shipping charge of $5, I tend to click on the brand new one. Alchian-Allen theorem describes my behavior.

Now, can we apply it to international students? If they travel far, incur the travel cost, surely they would be willing to incur additional cost (loss of leisure time) to get better grades than they would back home. Or do they?