DEFINITION of '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.

BREAKING DOWN 'Basing Point'

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.

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