Abstract for: How Price Fluctuations are Influenced by the Response of Intermediaries to Different Sales Methods

IranKhodro Co. (IKCO) is the largest automaker in Middle East. Although this company has a particular interest in international markets, still domestic market is its main market. Because of government regulations, rivalry is not aggressive in domestic market, but real prices for various types of cars have depreciated in recent years. Another problem this company encounters is the instability of its market. Price fluctuations provide a good opportunity for speculators to benefit from buying automobiles in low prices and selling them high. On the other hand, the presence of speculators in the market aggravates the uncertainty because the manufacturer perceives a demand different from the demand of end users and this leads to an unbalanced demand-supply in market. In this paper we will discuss how sales policies of this company lead to above trends in prices and exacerbates its financial problems. Using system dynamics modeling, we are going to answer questions like: What has been the effect of different sales methods on price fluctuations? And what is the effect of different sales methods in long term?