Price firming refers to the establishment of a fixed, unchangeable price in a contractual agreement. Unlike quoted prices, which are initial offers subject to negotiation, a firm price remains unchanged throughout the contract period. This provides certainty and stability in pricing, protecting against market fluctuations and facilitating budgeting. Examples of price firming mechanisms include fixed price contracts, guaranteed price contracts, and locked-in price agreements. However, it’s important to consider the potential limitations, such as reduced flexibility and potentially higher prices compared to non-firm contracts. Understanding price firming mechanisms is crucial for parties involved in contractual agreements to make informed decisions based on their individual circumstances and risk tolerance.
