30 Jun Delivered Pricing and Multiple Basing Point Equilibria: A Re-evaluation
“Delivered Pricing and Multiple Basing Point Equilibria: A Re-evaluation” Quarterly Journal of Economics 99, 1984
This paper examines delivered pricing with systematic freight absorption in the light of the modern theory of spatial competition. Delivered pricing, multiple basing point equilibria are compared with f.o.b. mill pricing equilibria under a variety of assumptions about market structure and firms’ conjectural variations. It is shown that there is no clear reason for preferring f.o.b. pricing or delivered pricing in the abstract. Delivered pricing is likely to be preferable from the consumer’s standpoint either if the conjectural variations of the firms are high, or if conjectural variations are consistent, and there are few firms in the industry.