The Federal Trade Commission's action to eliminate basing-point pricing in the soft plywood industry during the mid 1970s created a natural experiment: the author finds that the FTC's action had no effect on the delivered price of the base-site product (Douglas fir plywood) but decreased the delivered price of the non-base-site product (pine plywood) for many consumers. The evidence suggests that the detrimental effects of basing-point pricing for economic welfare were reflected entirely in the behavior of non-base-site firms.

The Federal Trade Commission's action to eliminate basing-point pricing in the softwood plywood industry during the mid-1970's created a natural experiment: I find that the FTC's action had no effect on the delivered price of the base-site product (Douglas fir plywood) but decreased the delivered price of the non-base-site product (pine plywood) for many consumers. The evidence suggests that the detrimental effects of basing-point pricing for economic welfare were reflected entirely in the behavior of non-base-site firms.

Given adverse selection, durable goods that trade less frequently depreciate more quickly. Consistent with this prediction, I find an inverse relationship between depreciation and trading volume for less reliable brands of used business aircraft. Additionally, recent theoretical analyses suggest that leasing, by increasing the average quality of used goods offered for sale, may reduce adverse selection in durable goods markets. Indeed, I find an increase in the direct relationship between depreciation and trading volume for aircraft models with relatively high lease rates. Together these findings suggest that adverse selection is a prominent feature of the market for contemporary used business aircraft and that leasing mitigates the consequences of asymmetric information about the quality of used durable goods.