Pricing
The prices of boxes and cases are determined as buyers and sellers place bids and offers to buy or sell. A bid is the price at which somebody wishes to buy, and an offer (or ask) is the price at which somebody wishes to sell. Since Dealernet is not an automated match marketplace (ex. stock market), an offer is not binding until the payment terms have been clearly established and the offer has been accepted.
The overall market is made up of hundreds of traders, who may have differing ideas about the value of a specific box and thus the price at which they are willing to buy or sell it. Dealernet provides a platform where such trading can be easily conducted by matching buyers and sellers of boxes.
Matching Buyers to Sellers
A two-sided market consists of the bid and the offer, and the spread is the difference in price between the bid and the offer. The narrower the price spread and the larger size of the bids and offers, the greater the liquidity of the box. A price spread that is narrower will mean that the bids and offers are close and price and will cause more of the product to be sold. Moreover, if there are many buyers and sellers at sequentially higher and lower prices, the market is said to have good depth.
Market Supply and Demand
Dealernet also offers a fascinating example of the laws of supply and demand at work in real time. For every transaction, there must be a buyer and a seller. Because of the immutable laws of supply and demand, if there are more buyers for a specific box than there are sellers of it, the price will trend up. Conversely, if there are more sellers than buyers, the price will trend down.
The bid-ask or bid-offer spread—the difference between the bid price for a box and its ask or offer price—represents the difference between the highest price that a buyer is willing to pay and the lowest price at which a seller is offering the box. A trade transaction occurs either when a buyer accepts the ask price or a seller takes the bid price. If buyers outnumber sellers, they may be willing to raise their bids in order to acquire the box; sellers will, therefore, ask higher prices for it, ratcheting the price up. If sellers outnumber buyers, they may be willing to accept lower offers for the box, while buyers will also lower their bids, effectively forcing the price down.