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What Are the Different Types of Price Systems?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 04 November 2016
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Price systems are examples of strategies that help to establishing pricing which is in line with the supply and demand for certain goods and services. On a national level, systems of this type have to do with how that relationship is managed, especially in terms of how much government is involved in that process. There are three different types of price systems in common use today, with the third approach being a combination of the other two.

One of the more common types of price systems in use today is the free price system. This approach calls for the prices of goods and services to be based strictly on what is happening in terms of supply and demand for those products. If any governmental influence exists, it is kept to a bare minimum. Of all the pricing systems, the free approach is easily the most driven by the quantity of goods produced and the demand for those goods by consumers. At the same time, the level of competition could reach a point in which a few companies dominate an industry and control both the supply and the pricing, effectively discouraging smaller companies from attempting to compete.

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A second approach is the fixed price system. A fixed system calls for a great deal of governmental regulation and involvement, effectively creating a situation in which government officials make the call of how goods are priced in the marketplace. Often, this also involves a situation in which companies are only allowed to market a certain number of goods in the national marketplace, although they may be free to produce and sell as many goods abroad as they choose. Like all price systems, this approach provides both benefits and liabilities, since prudent use of the model ensures that consumers have the goods they need at prices that are in line with the economy, but can also create a situation in which the potential for competition among companies is kept to a minimum.

The hybrid or mixed price system is also a popular option in many nations. Price systems of this type attempt to combine the best points of both a fixed and a free system into a model that benefits everyone concerned without necessarily leading to incurring liabilities or drawbacks. With mixed price systems, the role of government is noticeable in the business sector but is limited with a series of checks and balances that still leave ample room for competition and provide consumers with multiple choices of any given good or service.

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