Abstract
This article investigates the relationship between imperfect competition and basing point pricing. Basing‐point pricing can emerge if firms at the base site are Bertrand competitors, firms at non‐base locations are less than perfectly competitive with each other and are von Stackleberg leaders with respect to base site production, and the products produced at the base and non‐base locations are perfect substitutes. Basing‐point pricing is associated with competitive prices by base site firms but with markups by non‐base site firms equal to their phantom freight charges.
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