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Institutional Foundations of Pricing Policy in the Steel Industry

Published online by Cambridge University Press:  24 July 2012

Marvin J. Barloon
Marvin J. Barloon
Affiliation:
Professor of Economics at Western Reserve University
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Extract

The decision of the U. S. Supreme Court in the Cement Institute case (1948) had the effect of outfowing the system of basing point pricing used in the steel industry. But until 1953 the decision had relatively little effect on steel price competition because a strong sellers' market prevailed. In the future, as idle capacity continues, steel executives almost certainly will evolve a new method of securing uniform delivered prices. This objective for pricing policy is dictated by two broad sets of factors: the organizational structure of the industry (fewness of firms, an undifferentiated product, and inelastic demand), and the geographical distribution of the phnts of the largest producers. This article analyzes the multiple basing point system used up to 1948, the temporary expedients employed from 1948 to 1954, and the probable pricing policies of the future.

Type
Research Article
Information
Business History Review , Volume 28 , Issue 3 , September 1954 , pp. 214 - 235
Copyright
Copyright © The President and Fellows of Harvard College 1954

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References

1 Federal Trade Commission v. The Cement Institute, et al., 333 U. S. 683 (1948).

2 Steel Facts, American Iron and Steel Institute (June, 1953).

3 Annual Capacities of Coke Ovens, Blast Furnaces and Steelmaking Furnaces as of January 1, 1954, American Iron and Steel Institute.

4 Annual Statistical Report, 1952, American Iron and Steel Institute (New York, 1953), p. 66.

5 Dual quotations of this type were apparently made at times during 1953 and 1954. However, the separate mills operated by the one firm were non-competing with respect to certain of the products affected in that the quotations related to different physical dimensions of rolled steels. Furthermore, the situation was transitional between the preceding period of steel shortage and the developing steel surplus, and the dual quotations could not be allowed continuously to divert orders from milk where the firm's executives wished to produce them to other mills operated by the same firm.

6 Hearings before the Temporary National Economic Committee, Part 27 (Government Printing Office, Washington, 1940), p. 14,555.