Pricing in a volatile market :: Economics

Pricing in a volatile food merchandiseplaceQuestions 1)What are the main causes of price volatility in a market? To whatextent and how take a leak this general causes applied in the treacle and make-upmarket?First of all the fragmentation of the market causes prices to bevolatile. therefore a unique policy can not be sort out up and a sort ofjungles law is created. Each producer adapts its induce prices as regardits operating costs, pointments, volume of production. More over the workings rules are different from one country to another and standardsof living are worlds apart so it can easily explain the severance amongsttwo prices.As no single producer has a deep production compare to the others, itcan not impose its prices to the market and that is wherefore it is obligedto cope with. The volatility of the market is to a fault created by the gapbetween a so to s level prosperity period during which the producersinvest and the second period when capacity created is too much compareto the needs. The commotion is bigger than the demand so prices fall.These general causes applied in the pulp and paper market because itcorresponds to all that characteristics. Indeed it is a very disunited industry. For example no single producer has more than 6per cent share of the overall market and the 10 largest producersrepresent less than the half(prenominal) of the overall production. As we alreadysaid for a market broadly speaking, in the pulp and paper marketcompanies during a prosperity conviction invested in more capacity to takeadvantage of high prices solely as two years are necessary to get a plantup and running, a down period appeared and demand has passed the peakand prices are lower. To cover their invest producer dump all their wasted new capacity and it causes the prices to decline steeper. It isa vicious circle. An other part explains the price volatility inthe pulp and paper market, it is the entry of lower-cost producers ( southern American, Asian) compare to traditionally producers (Scandinavian, European and North American). More over the Asianeconomic crisis played a role in price volatility.2) What rig do you think consolidation in the industry will leaveon- (A) the biggest producersThe consolidation through takeovers and alliances for the biggestproducers allows them to develop bigger global market share and bythis way they may have a great influence over market prices. Theycan be able to have a real power to decide prices. The joint venturescan also allow the producer to share their necessary investments or