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

Tinbergen Institute Discussion Paper No. 09-007/1

Amsterdam Center for Law & Economics Working Paper No. 2008-07

48 Pages Posted: 16 Nov 2008 Last revised: 30 Mar 2011

Maarten Pieter Schinkel

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE); Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Iwan Bos

Maastricht University

Date Written: December 1, 2008

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

JEL Classification: L41, K42, C12

Suggested Citation

Schinkel, Maarten Pieter and Bos, Iwan, Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing (December 1, 2008). Tinbergen Institute Discussion Paper No. 09-007/1; Amsterdam Center for Law & Economics Working Paper No. 2008-07. Available at SSRN: https://ssrn.com/abstract=1300947 or http://dx.doi.org/10.2139/ssrn.1300947

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Iwan Bos

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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