Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing

Iwan Bos and Maarten Pieter Schinkel
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Maarten Pieter Schinkel: University of Amsterdam

No 09-007/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Basing-point pricing is known to have been abused by geographically dispersed firms in order to eliminate competition on transportation costs. This paper develops a topographic test for collusive basing-point pricing. The method uses transaction data (prices, quantities) and customer project site locations to recover the basing-point(s) from which delivered prices were calculated. These bases are compared to the locations of the production mills in a test that discriminates between competitive and collusive basing-point pricing. We define a measure for the likelihood of collusion that can be used to screen industries that traditionally apply delivered pricing for the presence of cartels. We operationalize this screen with a software. The test is hard to beat for cartels using this otherwise elusive form of price-fixing. When a cartel was found to have abused the basing-point system, our method can be used to estimate antitrust damages.

Keywords: basing-point pricing; cartels; detection; antitrust; damages (search for similar items in EconPapers)
JEL-codes: C12 K42 L41 (search for similar items in EconPapers)
Date: 2009-01-20
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20090007

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