Imperfect Competition and Basing-Point Pricing

Thomas W Gilligan

Economic Inquiry, 1993, vol. 31, issue 3, 394-409

Abstract: This article investigates the relationship between imperfect competition and basing-point pricing. Basing-point pricing can emerge if firms at the base site are Bertrand competitors, firms at nonbase locations are less than perfectly competitive with each other and are von Stackleberg leaders with respect to base site production, and the products produced at the base and nonbase locations are perfect substitutes. Basing-point pricing is associated with competitive prices by base site firms but with markups by nonbase site firms equal to their phantom freight charges. Copyright 1993 by Oxford University Press.

Date: 1993
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