Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing
Maarten Pieter Schinkel
University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)
December 1, 2008
Tinbergen Institute Discussion Paper No. 09-007/1
Amsterdam Center for Law & Economics Working Paper No. 2008-07
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.
Number of Pages in PDF File: 48
Keywords: basing-point pricing, cartels, detection, antitrust, damages
JEL Classification: L41, K42, C12
Date posted: November 16, 2008 ; Last revised: March 30, 2011
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