THE INFLUENCE OF PRICE REPORTING AGENCIES ON ECONOMIC SYSTEMS: CHANGES IN PRICING IN THE GLOBAL IRON ORE MARKETJournal: International scientific journal "Internauka." Series: "Economic Sciences" (Vol.1, No. 41)
Publication Date: 2020-09-30
Authors : Ahapova Viktoriia;
Page : 72-84
Keywords : prices; price reporting agency; iron ore; performativity; benchmark;
Institutions of information activity play not only the role of informing the actors in economic, political, and social systems. Particularly, specialized media can fuel changes in established systems, contributing to their dynamism, transparency and approximating to media vision of the situation. Exempling the iron ore market, the author examines the influence of information activity, namely specialized media, price reporting agencies, on the relationship between business actors, sellers and buyers, mining companies and metallurgical enterprises. Specifically, this study considering the transition of companies in the 2010s. from long-term contracts, the prices of which were formed during lengthy negotiations «behind closed doors» to formula-based contracts, that rely on industry reference prices — benchmarks that are published by the aforementioned specialized media. The goal of the article, on the one hand, is to present the results of an analysis of the role of price reporting agencies in changing pricing patterns using the example of the global iron ore market. On the other hand, it provides a quantitative assessment of the impact of the industry's benchmark IODEX implementation, published by the price reporting agency Standard & Poor's Global Platts, on the level of average selling prices of the Brazilian mining company Vale. The toolkit of performative theory makes it possible to study the influence of the media on economic systems. Firstly, price reporting agencies are not a stable purely economic phenomenon, but they rather combine social, political and economic constructs. Secondly, it is quite obvious that, first of all, the product of mass media activity has verbalized form. Thirdly, the publication of news, prices, databases, forecasts by price reporting agencies, the exchange of this information in the process of communication with market participants brings economic reality closer to the predicted values. The performed calculations of the effect size of the benchmark introduction into contract prices showed a significant impact. This means that we can say that specialized media do not just observe economic events and inform their readers, but influence economic systems directly alongside with market participants.
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