The Conventional Wisdom about Cross-Haul

Abstract

Current proponents of neoclassical analysis sometimes exclude imperfect competition as a serious explanation of certain pricing behavior. The authors in this paper focus on the 1981 Southern Plywood antitrust litigation demonstrating that behavior from that case is readily explained within a traditional monopoly/basing-point pricing model whereas alternative economic explanations claiming price-taking behavior must rely upon external explanatory factors. The authors suggest a simple algebraic model to facilitate distinguishing whether observed pricing is or is not consistent with a price-taking explanation.