Abstract
ABSTRACT. It has been contended that basing‐point pricing (BPP) is not indicative of anticompetitive behavior because a cartel would never attain maximum profits by using BPP. We disprove this contention. BPP is the profit‐maximizing pricing strategy for a cartel that faces competition only at selected locations. In addition, our model explains the emergence of multiple basing points, and establishes that BPP must be consistent with a market‐division scheme.
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