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

Author

Listed:
  • Iwan Bos

    (University of Amsterdam)

  • Maarten Pieter Schinkel

    (University of Amsterdam)

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.

Suggested Citation

  • Iwan Bos & Maarten Pieter Schinkel, 2009. "Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing," Tinbergen Institute Discussion Papers 09-007/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20090007
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    References listed on IDEAS

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    More about this item

    Keywords

    basing-point pricing; cartels; detection; antitrust; damages;
    All these keywords.

    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

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