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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-007/1.
Date of creation: 20 Jan 2009
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert H. Porter & J. Douglas Zona, 1999.
"Ohio School Milk Markets: An Analysis of Bidding,"
RAND Journal of Economics,
The RAND Corporation, vol. 30(2), pages 263-288, Summer.
- Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
- Porter, Robert H & Zona, J Douglas, 1993.
"Detection of Bid Rigging in Procurement Auctions,"
Journal of Political Economy,
University of Chicago Press, vol. 101(3), pages 518-38, June.
- Patrick Bajari & Lixin Ye, 2003.
"Deciding Between Competition and Collusion,"
The Review of Economics and Statistics,
MIT Press, vol. 85(4), pages 971-989, November.
- THISSE, Jacques-François & VIVES, Xavier, .
"On the strategic choice of spatial price policy,"
CORE Discussion Papers RP
-793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cabou, Christian G & Haddock, David D & Thorne, Michele H, 1992. "An Analytic History of Delivered Price Litigation: Do Courts Properly Distinguish Rivalrous from Collusive Instances?," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 307-21, April.
- Gilligan, Thomas W, 1992. "Imperfect Competition and Basing-Point Pricing: Evidence from the Softwood Plywood Industry," American Economic Review, American Economic Association, vol. 82(5), pages 1106-19, December.
- RÃ¼ggeberg, J. & Schinkel, M.P. & Tuinstra, J., 2005.
"Illinois Walls: How barring indirect purchaser suits facilitates collusion,"
CeNDEF Working Papers
05-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2008. "Illinois Walls: how barring indirect purchaser suits facilitates collusion," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 683-698.
- Maria Paz Espinosa, 1992. "Delivered Pricing, FOB Pricing, and Collusion in Spatial Markets," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 64-85, Spring.
- Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 467-486, May.
- Soper, Jean B, et al, 1991. "Basing Point Pricing and Production Concentration," Economic Journal, Royal Economic Society, vol. 101(406), pages 539-56, May.
- Haddock, David D, 1982. "Basing-Point Pricing: Competitive vs. Collusive Theories," American Economic Review, American Economic Association, vol. 72(3), pages 289-306, June.
- Robert Porter, 2005. "Detecting Collusion," Review of Industrial Organization, Springer, vol. 26(2), pages 147-167, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
If references are entirely missing, you can add them using this form.