Fixed price

The term fixed price is a phrase used to mean the price of a good or a service is not subject to bargaining. The term commonly indicates that an external agent, such as a merchant or the government, has set a price level, which may not be changed for individual sales. In the case of governments, this may be due to price controls.

Bargaining is very common in many parts of the world, outside of retail stores in Europe or North America or Japan, this makes this an exception from the general norm of pricing in these areas.

A fixed-price contract is a contract where the contract payment does not depend on the amount of resources or time expended by the contractor, as opposed to cost-plus contracts. These contracts are often used in military and government contractors to put the risk on the side of the vendor, and control costs.

Historically, when fixed-price contracts are used for new projects with untested or developmental technologies, the programs may fail if unforeseen costs exceed the ability of the contractor to absorb the overruns. In spite of this, such contracts continue to be popular. Fixed-price contracts tend to work when costs are well known in advance.

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