Chapter 5. PRICE DISCOVERY. By : Nur Baladina, SP. MP. INTRODUCTION. PRICE DETERMINATION: the process by which the broad forces of supply and demand establish a general, market-clearing, equilibrium price for a commodity.
By : Nur Baladina, SP. MP.
Five systems of price discovery for farm products have been identified:
1. Individual, decentralized negotiation
2. Organized, central market trading
3. Formula Pricing
4. Bargained Prices
5. Administered Prices
Consequently, price discovered in this way tend to vary widely for different transactions.
Bargained price discovery probably works best when there are relatively few producers in a concntrated geographic area selling a product that can be stored or withheld from the market.