Target price in Islamic economics and its formation mechanism

Document Type : Original Article

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Taibah University, College of Business Administration, Department of Finance and Economics, Kingdom of Saudi Arabia.

Abstract

This research deals with the connotation of price, its related concepts; underlying tools that govern its mechanism, ways of rationalization, and price characteristics in Islamic economics. The main findings of the research include:

Islamic economics discourages the predetermination of price and cost; rather it focuses on the setting framework, tools, and means of rational negotiations based on mutual acceptance among the dealers. These include rules, regulations, and values that justify its structure and operational tools that result in fair, just, and relatively stable prices and costs.
Islamic economics relies on market price and acceptable mutual values seeking fairness; however, it concerns with the bounty that whenever it combines with farness, various positive effects are guaranteed.    
In the case of the distorted price mechanism, imbalances exist between negotiated parties that the required mutual acceptance will be missed paving the way for government intervention to set a mandatory suitable and fair price. In this case, the price is unique reflecting the value that represents the required fair price.

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