Price Taker

Take a look at yourself in the mirror. Are you a price maker, or a price taker?

Price makers decide themselves how much to sell something for...only because they can. Monopolies, for instance, get to pick and choose how much to sell their goods for. If multiple firms in an oligopoly got together behind closed doors and colluded to sell a good at a higher-than-market-price (looking at you, OPEC), that’s price making, too.

Price takers are to capitalism as the bald eagle is to America: more symbolic than accurate, but also very necessary. Price takers are firms that sell their goods and services in a competitive market, where supply meets demand in equilibrium. When price takers try to raise their prices, they lose all their customers because there are lower prices for the same or similar goods elsewhere.

Price takers are good for economic growth, since they encourage competition. That competition keeps prices low for consumers, and it encourages innovation, i.e. new stuff. Bigger, better, lighter, sleeker...you know the image new stuff is always trying to go for. This is reflected in the U.S.’s antitrust laws, which prevent price-setting.

Yet many firms today are operating in a monopolistically competitive market. That means they’ve made their product so special that they basically have a monopoly on it. Brand names are good at this. Want a Gucci bag? A Macbook? Sure, there are other bags and other laptops, but you’re not just looking for a bag or a laptop. You’re looking for a status symbol. These firms are more price makers than they are price takers, since Gucci isn’t really competing with bags at Target, and Macbooks aren’t really competing with HP laptops.