Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing
AbstractBasing-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.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-007/1.
Date of creation: 20 Jan 2009
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basing-point pricing; cartels; detection; antitrust; damages;
Find related papers by JEL classification:
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-COM-2009-02-28 (Industrial Competition)
- NEP-LAW-2009-02-28 (Law & Economics)
- NEP-MKT-2009-02-28 (Marketing)
- NEP-PPM-2009-02-28 (Project, Program & Portfolio Management)
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