A fixed price is a price designated for a
good
In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice between possible actions. Good is generally considered to be the opposite of evil. The specific meaning and etymology of the term and its ...
or a
service that is neither subject to
bargaining
In the social sciences, bargaining or haggling is a type of negotiation in which the buyer and seller of a Goods and services, good or service debate the price or nature of a Financial transaction, transaction. If the bargaining produces agree ...
nor
bartering. The price may be fixed since the seller has placed it, or given that the price is managed by the authorities under
price regulation. Fixed prices may also refer to
swaps whereby payments are determined upon a never-ending
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...
, if not referring to
negotiated price points that aren't amendable under regular situations. These also extend towards
fixed-price contracts, whereas the price is not permitted to fluctuate unless there are premeditated mitigating situations; The equivalents of these, by definition, are
cost-plus contracts, where the contractor-originating costs are managed, likewise with additional revenue subsidies issued.
Bargaining is very common in many parts of the world, primarily in the
Middle East
The Middle East (term originally coined in English language) is a geopolitical region encompassing the Arabian Peninsula, the Levant, Turkey, Egypt, Iran, and Iraq.
The term came into widespread usage by the United Kingdom and western Eur ...
,
Africa
Africa is the world's second-largest and second-most populous continent after Asia. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 20% of Earth's land area and 6% of its total surfac ...
as well as
Asia
Asia ( , ) is the largest continent in the world by both land area and population. It covers an area of more than 44 million square kilometres, about 30% of Earth's total land area and 8% of Earth's total surface area. The continent, which ...
but not in most
retail store
The retail format (also known as the retail formula) influences the consumer's store choice and addresses the consumer's expectations. At its most basic level, a retail format is a simple marketplace, that is; a location where goods and services ar ...
s in Europe, North America, and Japan. Elsewhere, fixed prices tend to be an exception from the norm. Before the
introduction of currency, both practices were the universally accepted
means of transaction, at a domestic and
international rate.
Fixed-price tender
In fix priced tender offers,
shareholders
A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
are granted permission to sell their firm in a firm subject towards a fixed price, generally set at a
premium opposed to the
market price
A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a phy ...
. These are usually limited-time offers, and commonly hold higher pricing than
market value
Market value or OMV (open market valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or '' fair market value'', although t ...
. They are often used by
acquiring companies to purchase a specific share quantity within target firms.
Fixed-price contract
A fixed-price contract is a contract where the contract payment does not depend on the amount of resources or time expended by the contractor, as opposed to
cost-plus contracts. Fixed-price contracts are often used for military and government contractors to put the risk on the side of the vendor and control costs.
Historically, when fixed-price contracts are used for new projects with untested or developmental technologies, the programs may fail if unforeseen costs exceed the ability of the contractor to absorb the
overruns. In spite of this, such contracts continue to be popular. Fixed-price contracts tend to work best when costs are well-known in advance.
Fixed-price contracts required by stimulus law by Matthew Weigelt Feb 17, 2009
See also
* F. W. Woolworth Company
* Testimony of Integrity
* Unit price
* Variable pricing
References
{{Authority control
Price controls