Resources Policy 27 (2001) 169–177 www.elsevier.com/locate/resourpol Price variability and marketing method in non-ferrous metals: Slade’s analysis revisited Isabel Figuerola-Ferretti a , Christopher L. Gilbert b,* a Department of Economics, Queen Mary London, Mile End Road, London E1 4NS, UK b FEWEB, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands Received 30 November 2000; received in revised form 17 August 2001; accepted 3 September 2001 Abstract We examine the impact of the pricing regime on price variability with reference to the non-ferrous metals industry. Theoretical arguments are ambiguous, but suggest that the extent of monopoly power is more important than the pricing regime as a determinant of variability. Slade (Quart. J. Econ. 106 (1991) 1309) argued that metals price volatility increased in the 1980s relative to the 70s, and that this was associated with a move from administered producer pricing to exchange pricing. These claims are only partially supported. Extension of Slade’s sample to the present indicates that any early differences between the variability of producer and exchange prices have now vanished.  2002 Published by Elsevier Science Ltd. Keywords: Price volatility; Non-ferrous metals; Exchange pricing Introduction Over recent decades, there have been two competing forms of market organization in the non-agricultural (metals and energy) primary sector—exchange pricing and producer (administered) pricing. Under the now dominant system of exchange pricing, products are con- tracted on an ‘unknown’ basis against an exchange price, or a short time average of such prices, at or near the delivery date. In this pricing arrangement, contracts specify the quantity and grade of the commodity to be delivered, the delivery date and a premium or discount of the price relative to the currently unknown spot exchange price at the delivery date (or a specified time average of such prices). Instead, under producer pricing, producers set product prices on a list basis, and trans- actions prices are negotiated at variable, often secret, dis- counts from the list prices. Economists tend to prefer exchange pricing on the arguments that it is infor- mationally more efficient and that it inhibits price dis- crimination. By contrast, producing companies often * Corresponding author. Tel.: +31-20-444-6102; fax: +31-20-444- 6020. E-mail addresses: i.figuerola-ferretti@qmw.ac.uk (I. Figuerola- Ferretti), cgilbert@feweb.vu.nl (C.L. Gilbert). 0301-4207/02/$ - see front matter  2002 Published by Elsevier Science Ltd. PII:S0301-4207(01)00017-4 suggest that producer pricing guarantees greater pre- dictability. In the post-1945 period, crude oil was subject to pro- ducer pricing, with prices set first by the oil majors and then by OPEC, until the breakdown of OPEC discipline together with the advent of oil futures trading resulted in a move to exchange pricing in the mid-80s. 1 In non- ferrous metals, aluminum and nickel prices were also set by dominant producers until the mid-80s, but both are now exchange priced. 2 Over the same period, copper saw producer pricing in the United States coexisting with exchange pricing elsewhere in the (non-socialist) world, although major producers attempted to ‘control’ exchange prices for a period in the early 60s as a prelude to moving to producer pricing. 3 In the zinc market there 1 The New York Mercantile Exchange (NYMEX) started trading Gulf crude oil in 1983. The International Petroleum Exchange (IPE) followed with Brent crude in 1988. 2 Aluminum and nickel trading started on the London Metal Exchange (LME) in 1979. The Comex division of NYMEX introduced an unsuccessful aluminum contract in the mid eighties, and relaunched aluminum trading in 1999. 3 Copper has been traded on Comex and the LME through most of the 20th century. It is now also traded in Shanghai and Singapore. See McNicol (1975) on the coexistence of producer and exchange pricing in copper and Prain (1975) on the attempt by the non-US copper min-