Basing Point

Basing Point
A specific location used in the basing point pricing system. Usually, the basing point is where the manufacturing of a product or production of a commodity takes place. Once set, the manufacturer will quote the base price plus a set shipping cost from that location, regardless of where the actual goods are shipped from.

The basing point can be used when determining the base price of a commodity. For example, if the base point is Chicago, then a shipment within Chicago will cost the base price, and a shipment outside Chicago will cost the base price plus the set shipping rate to the specific zone. In this way, prices can be set when buying or selling a particular commodity in a different location.

Economists have long argued that setting the price this way actually sets up a cartel, and so the practice has encountered some resistance, mostly in the form of discouraging the setting up of manufacturing plants away from the basing point.

Investment dictionary. . 2012.

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