Price Taker
Categories: Econ
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.
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![Finance: What is a Takedown?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.1089_770x433.jpg)
Finance: What is a Takedown?7 Views
finance a la shmoop what is a takedown well it's basically a commission or a [The definition of takedown]
spread that investment bankers um take down from the proceeds raised on a
securities offering ie an IPO well specifically that takers
down are called the syndicate and we wish we could tell you that with [People playing cards and smoking]
something mob-related but that's just a group of stock brokers who generally
sell to institutional accounts like mutual funds hedge funds and a big fat
family set of offices yeah like wealthy people's offices yeah at its essence the [Pile of cash]
take down is the gross profit that each syndicate member makes after the
placement of the securities after wire fees and other basic transactional costs
are covered such as the sellers of the securities get their dough whatever [The words 'illustrative example time' fall out of a piggy bank]
dot-com is selling 10 million shares of 20 bucks a pop the syndicate buys them
for 19 bucks each five minutes before placing them or selling them to the buy [Definition of the buy side]
side so there's a $1 spread in this placement and in most cases the lead
underwriter gets some percentage of the gross spread off the top to cover the [Calculation of the underwriter commission]
zillion dollars they spent on expensive lawyers and other bureaucrats being
certain that the securities offering complied with the you know 742 laws all ['The Big Book of 742 Laws' appears]
deriven from the 1933 and then 34 acts so if the lead banker gets a say a 15
percent override well then 85 cents net is left over for the takedown to be
distributed among the selling members of the syndicate and if any of those [Money being moved to the syndicate]
selling members feels they've been cheated well get ready to see one of [People stand up angrily in a board room]
these take down in this corner accountant wearing glasses 132 pounds so [Two men wearing boxing gloves ready to fight]
yeah pale-skinned alright sorry pal pick the right career [Guy is punched and knocked down]