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PRICE FORMATION
Where price authority is located.
Price is not a reflection of cost.
It is a function of authority.
Price Formation defines who is allowed to decide price, and when that decision is made.
This constraint exists to prevent pricing power from drifting downstream after production is complete.
The Distortion
In most trade systems, production happens first.
Pricing happens later.
Costs are incurred upstream –
but prices are set downstream, at the point of branding, positioning, or retail comparison.
This separation allows price to be justified after the fact, without reference to production reality.
Once costs are sunk, price becomes narrative.
How Distortion Appears
Price Formation distortion occurs when:
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Price is set after production is finished
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Downstream actors control the market interface
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Branding, storytelling, or comparison replaces cost logic
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Multiple intermediaries add margins independently
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Price changes absorb demand conditions, not production constraints
In these systems, producers operate under fixed costs,
while price floats freely above them.
Structural Consequence
When price authority sits downstream:
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cost and price disconnect
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margins stack invisibly
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risk concentrates upstream
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bargaining becomes asymmetric
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price loses signaling function
Production becomes a price taker in a system it sustains.
Structural Position
In the My Chakchouka system, price authority is anchored before production, not after distribution.
Price is established:
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prior to irreversible work
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prior to branding narrative
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prior to market signaling
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prior to demand optimization
Price cannot be retroactively justified by success.
Constraint Logic
The Price Formation constraint enforces four rules:
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No downstream price override
No actor may re-price value once production costs are committed.
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No narrative-based justification
Price cannot be explained by story, positioning, or comparison alone.
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No compounded authority
Margins cannot accumulate through successive independent markups.
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No retroactive pricing
Price is not adjusted to absorb volatility created elsewhere in the system.
What This Prevents
Without this constraint, systems tend to:
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inflate prices without sharing value
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convert branding into extraction
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reward control of perception over production
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normalize margin stacking
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obscure true cost structures
These effects appear gradually, then lock in.
What This Enables
When price authority is fixed upstream:
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costs remain legible
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margins stay bounded
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negotiation remains symmetric
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payment timing becomes enforceable
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risk allocation becomes visible
Price regains its function as signal, not weapon.
Position
This is not fairness.
This is location.
A system that sets price after production
will always exploit what has already been committed.
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