It is never easy to set a price for your own work. There are so many different approaches you can adopt as another blog suggests.
I went for option 1 determining the price by size. I think it is fair to everyone. It takes into consideration the material cost as well as the average amount of time it takes to paint a picture of that size. Obviously size is not the only determining factor. You will have to introduce a markup to take your market value into consideration.
Apparently I seem to have got it right since when speaking to a gallery owner only recently he confirmed that he would be able to sell my work at the price I was asking. That was after he had quickly carried out a calculation on his calculator considering taxation and his own margin.
I also make sure not to sell below my gallery prices since this would undermine the relationship with the gallery.