Alternative Preisbildungsmodelle – eine realitätsnahe Option?

Abstract

Alternative pricing models – a realistic option? The use of alternative pricing models as a means to automatize or at least facilitate the pricing of timber and thereby also reduce the volatility of timber prices has been under consideration for the past several years. The possibilities and limitations of such alternative pricing models are examined in this article using a retrospective comparative analysis. Overall, the results of six pricing models (these are: annual contract, quarterly contract, attenuation of the rate of change, mixed pricing, regression analysis derived price escalation clause, and self-fulfilling contract) are compared with the development of real timber prices between 2000 and 2010 of the state forest enterprise of Baden-Württemberg (Germany) and analyzed using a set of performance measures. It turns out that there is a conflict of objectives between determining the exact figure of the market price by alternative pricing models and reducing the volatility of timber prices. Thus, quarterly contracts show the market price well, though display no relevant volatility reduction effect; conversely, contracts with a defined attenuation rate lead to a substantial reduction of volatility but also to maximizing deviations from the market price. It is also questionable in how far price escalation clauses, that is, models which were calibrated from regression analysis on the basis of historical data, are able to predict the future development of market prices. At the moment, alternative pricing models can therefore hardly replace the real market-negotiated timber price. They can though support pricing negotiations between buyers and sellers, but primarily in time periods not characterized by a pronounced dynamic.