Trade-terms Based Pricing Method for Export Commodity

Abstract

By far, the researches on the pricing methods of export commodity from China are very limited. This paper proposes a pricing model for export commodity by taking risk factors and trade terms into account. More specifically, the pricing of bulk export commodities is affected by many factors, including cost factors, market supply and demand factors and risk factors. Cost factors include production costs and logistics costs, market supply and demand factors represent that commodity prices are affected by market supply and demand conditions, and risk factors mainly mean that different choices of trade terms, cost, insurance and freight (CIF) or free on board (FOB), will cause suppliers to bear different risks. In this paper, the economic order quantity (EOQ) model is used to quantify production costs, the "base price + freight index fluctuation" model and the "base price + fuel price fluctuation" model are used to quantify logistics costs, and the risk costs under the influence of risk factors are calculated based on historical data. Finally, a pricing model for commodities based on different trade terms (CIF or FOB) is established, and the optimal prices can be determined.