Pricing in a volatile market :: Economics

Pricing in a volatile commercializeQuestions 1)What atomic number 18 the main causes of price volatility in a securities industry? To whatextent and how keep this general causes applied in the flesh and base marketplace?First of all the fragmentation of the market causes prices to bevolatile. and so a unique policy can not be mark off up and a sort ofjungles law is created. Each producer adapts its pull in prices as regardits operating costs, assignments, volume of production. More over the functional rules are different from one country to another and standardsof living are worlds apart so it can easily explain the breakout in the midst oftwo prices.As no single producer has a greathearted 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 besides created by the gapbetween a so to s pecker prosperity period during which the producersinvest and the second period wh en capacity created is too much compareto the needs. The conjure 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 garbled industry. For example no single producer has more than 6per cent share of the overall market and the 10 largest producersrepresent less than the one-half of the overall production. As we alreadysaid for a market primarily speaking, in the pulp and paper marketcompanies during a prosperity date 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 duplication new capacity and it causes the prices to decline steeper. It isa vicious circle. An other constituent explains the price volatility inthe pulp and paper market, it is the entry of lower-cost producer s ( southerly American, Asian) compare to traditionally producers (Scandinavian, European and North American). More over the Asianeconomic crisis played a role in price volatility.2) What nub do you think consolidation in the industry will haveon- (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 greater 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