Base Point Pricing

Base point pricing is the system of firms setting prices of their goods based on a base cost plus transportation costs to a given market.[1] Although some consider this a form of collusion between the selling firms (it lowers the ability of buying firms to gain a competitive advantage by location or private transportation), it is common practice in the steel and automotive industries. It allows firms to collude by simply agreeing on a base price.

Types

  1. Point Pricing (-5 to +5 range)
  2. Rebate Pricing (-5 to +5 range)
  3. Bond Pricing (+95 to +105 range)

A pricing approach that involves designating a particular geographic location as a basing point and then charging customers as a freight cost from that location to the location of the customer. Or a pricing method in which customers are charged freight cost from a base point; the base point may be chosen arbitrarily, but the location of one of the company's manufacturing plant is commonly used.

See also

References



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