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To mitigate the price rise during a shortage, I have been thinking about an insurance-type structure. If a supply runs short, there’s a very real need for peopl
by orev 7y ago
To mitigate the price rise during a shortage, I have been thinking about an insurance-type structure. If a supply runs short, there’s a very real need for people to actually produce the product, but that can result in having to call more people in to work, longer hours, overtime, etc. And there’s also the extra cost of delivery.
With an insurance structure in place to provide funds during these situations, it would allow a quicker response without as much of a spike in prices. Companies could draw the funding for these increased costs from the insurance instead.
- ThJ 7y agoThis is what futures contracts are for. They are settled with a physical delivery or in cash, depending on the contract. Futures trading is a prediction market. If you produce a commodity, you could, for example, place a sell order that is settled on a certain date in the future, and if you’re lucky, the market price will be below that of the price set in the order. The buyer of the future will then purchase the commodity from you at the agreed price, or for cash settled futures, he’ll pay you the difference. If the market price is higher, the difference is paid to the buyer, if the future is cash settled.