Price Taker / Price Maker

Depending upon the level of competition in the market, firms may either have enough market power to set prices and be a price maker, or have so little market power that they have to follow the market price set by others, and be a price taker. For example, when petrol retailers make decisions about pump pricing, each of the largest players is big enough to create a precedent, and once one company moves and sets a price, the other companies tend to display ‘orderly marketing’ and respond at or around that price. Smaller independent retailers are price takers, and have to respond to the market price set by the larger retailers. See also Market Concentration and Market Structure.