Delivered Pricing and Multiple Basing Point Equilibria: A Re-evaluation

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

Abstract

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.