The Palgrave Encyclopedia of Strategic Management

Living Edition
| Editors: Mie Augier, David J. Teece

Price Taking

  • Edward F. Sherry
Living reference work entry
DOI: https://doi.org/10.1057/978-1-349-94848-2_675-1

Definition

A buyer is a price taker when he believes he is unable to affect the price he pays for goods or services. Alternatives to price taking, which are more popular in some cultures than others, include bargaining and haggling over price.

A buyer acts as a price taker in situations where he believes that he is unable to affect the price that he must pay for the goods or services that he purchases. In perfectly competitive markets, the usual explanation is that buyers have no incentive to buy at a price above the market-clearing price, as they can buy all that they want at that price; and that sellers have no ability to buy at a price below the market-clearing price, because sellers can sell all their output to other buyers who are willing to buy at that price.

In mainstream textbook-level economics, it is usually assumed that buyers act as price takers except in oligopsonistic markets, in which large buyers have some degree of market power.

That said, in many cultures there is a...

Keywords

Transaction Cost Consumer Surplus Good Price Price Taker Transaction Cost Economic 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© The Author(s) 2016

Authors and Affiliations

  1. 1.Berkeley Research GroupEmeryvilleUSA