Basing Point Pricing: Competition Versus Collusion
AbstractThe authors consider the implications of game-theoretic models for the competitive or collusive nature of basing point pricing. In one-shot games, equilibrium price schedules do not generally conform to basing point pricing with unrestricted price competition. Nevertheless, basing point pricing can emerge in dynamic contexts. Define modified FOB price policy as using FOB in one's natural market and matching the rival's delivered price whenever profitable. A configuration where both firms do this is a subgame perfect equilibrium of a two-stage game where firms choose first price policies and then compete in the marketplace. Further, with repeated.competition basing point pricing can be used as punishment device. Copyright 1992 by Blackwell Publishing Ltd.
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 136-90.
Length: 7 pages
Date of creation: 1990
Date of revision:
competition ; pricing ; game theory;
Other versions of this item:
- Thisse, Jacques-Francois & Vives, Xavier, 1992. "Basing Point Pricing: Competition versus Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 249-60, September.
- THISSE, Jacques-François & VIVES, Xavier, . "Basing point pricing: Competition versus collusion," CORE Discussion Papers RP -1003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Vives, Xavier, 2005. "Games with strategic complementarities: New applications to industrial organization," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 625-637, September.
- Miklós-Thal, Jeanine, 2008. "Delivered pricing and the impact of spatial differentiation on cartel stability," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1365-1380, November.
- Aguirre Pérez, Ignacio & Martín Arroyuelos, Ana María, 2001.
"On the strategic choice of spatial price policy: the role of the pricing game rules,"
2001-04, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
- Iñaki Aguirre & Ana M. Martin, 2001. "On the strategic choice of spatial price policy: the role of the pricing game rules," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
- Aguirre, Inaki & Espinosa, Maria Paz & Macho-Stadler, Ines, 1998. "Strategic entry deterrence through spatial price discrimination," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 297-314, May.
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