1. Field of the Invention
This invention relates in general to methods and systems for determining a price for a commodity, and more particularly, to methods and systems for determining a price for a commodity on a spot market.
2. Description of the Related Art
In order to determine the expected demand of a commodity, whether a product or service, for a given unit price on a spot market, a simple price-demand curve can be used. If a company can accurately define a price-demand curve, it can optimize its operations. While price-demand concepts are easy to understand, accurately defining the proper curve has been a problem.
If the company has historical information on prices and quantities sold, the “curve” from the historical data may not look like a curve at all. The data may be scattered (i.e., “noisy”). Due to the noise, many companies have effectively forfeited the idea of a price-demand curve and use something else.
Another problem is that demand curves are not consistent over time. Factors change the shape and location of the demand curve during any particular period in time. Additionally, if a company tries to capture demand and price, the company is looking in only two dimensions. In reality, generation of the demand curves can involve multiple dimensions (i.e., other factors) that can affect prices and demand. When a multi-dimensional problem is limited to considerations in only two dimensions, the problem will typically not be accurately solved.
In another attempt to address the problem, historical data has been filtered. One filter may restrict data to the last few days, meaning only current data is used. Simple filtering does not completely address the problem, and therefore, may not accurately define the proper price-demand curve.
The inability to define accurately a price-demand curve for spot market sales of a commodity means that many companies may not be selling their goods or services at the right price in a manner consistent with the companies″goals. In some industries, the profit margins are low and using any price other than the price optimized for profit may make the difference between generating a profit or turning a loss.