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Compare bid price and offer price
Before going for comparison between bid and offer price, let us first try to understand the concept of bid price and offer price with an example.
Let us a vendor offer a price for a T-shirt of Rs.500/- and the customer starts bidding at Rs.300/- then spreads the value of Rs.200/- . In reality bid amount and incremental changes are not the same.
From the above example, the customer will not bid directly 300/-, initially he will go for less than 300 and gradually he ends up in 300 and ends the bid. If there is only a single bidder then the vendor goes for 300/- and begins transactions.
If there is more than one bidder then fighting starts and the vendor may get more price then he anticipated. More the bidder, the vendor may get more amount because there will be price fights between bidders.
The above structure can be shown as follows−
Here, the bidding price may be higher/lower than the offer price depending on the number of bidders.
Differences
The major differences between bid price and offer price are as follows−
| Sr.No | Bid price | Offer price |
|---|---|---|
| 1 | It is termed as the maximum price at which a buyer wants to buy stock/security/commodity. | It is termed as the minimum price where a seller can sell a commodity. |
| 2 | Also called as auction price or Bid price. | Also called as impact price or Ask price. |
| 3 | Broker will set a lower price than the offer price, if you want to sell stock. | Broker will set a higher price than the offer price, if you want to buy a stock. |
| 4 | Bid price is always lower than offer. | Offer price is always higher than bid price. |
| 5 | Always fluctuating and changing incrementally. | Price is constant. |
| 6 | For good liquidity, the bid price is almost the same or slight change from an offer price. | For good liquidity, the offer price is the same as the bid price. |
| 7 | In favour of the buyers. | In favour of the buyers (if he gets a discount in purchasing bulk orders). |
| 8 | No limitation in setting the bid price. | Has limitations in setting price (price based on present market rate/product quality). |
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