Price Fixing – Part I

It is interesting to know that the competitors join hands to ensure they fool the customers. In any market, customer is considered to be the king. But there can be many places where in he is just fooled. Isn’t it interesting? I was wondering whether such things do happen in real or is it only theory. Now I am convinced that there is price fixing in the market and the customers are fooled at large. I don’t know whether it is a good practice or a bad practice to control the demand and supply chain but I know in long run it might not help the competitors.

From Wikipedia:

Price fixing is an agreement between participants on the same side in a market to buy or sell the same product, service, or commodity only at a fixed price or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. The group of market makers involved in price fixing is sometimes referred to as a cartel.

Price fixing may have the intent of ultimately pushing the price of a product as high as possible, leading to profits for all sellers, but price fixing may also have the goal to fix, peg, discount, or stabilize prices. The principal feature involved in price fixing is any agreement regarding price, whether expressed or implied. In sell transaction, a buyer, meanwhile, may experience the practice as price gouging”

I can relate this to the place where I buy computer products. I generally go to Silver Jubilee Park Road for my computer hardware/software shopping. I have seen so many computer shops in the same locality. Every other guy out there makes money else the shops would have been close down by now. It is like a community business. I see guys from a particular community only have shops there. If they are all of the same community how can they survive in such competition?

The answer is co-operation. Each and every dealer out there has some or the other pact with the other dealers in the locality. This is ethically wrong while doing business since customer is fooled. There might be many shops but in reality it is just one huge shop with many sub dealers. Depending on the customer, how smart he is, he gets the deal in these kinds of places. It is not fair but that is how the business is done. I have seen many times the dealer calling other dealers and asking for prices and then giving the customer the goods. It is complicated as some dealers don’t sell directly to customers and they prefer to sell to the other dealers only. How they achieve it?

Contd in Part II.

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2 thoughts on “Price Fixing – Part I

  1. Vikram says:

    It is not only the dealers but even manufacturers is each and every industry do it in one form or another. It is only when there is a new entrant who wants to establish his own share in the market that the unspoken rules are broken for sometime until ‘normalcy’ reigns. This is to ensure that all the fat cats keep making enough money and their inherent inefficiencies are hidden under this price fixing blanket

    Thedealers of a community in a locality have a understanding of how big is the demand in that particular place and how many shops/ businesses of what scale will it support. there is ‘normalcy’ untl this balance is maintained

    “This is ethically wrong while doing business since customer is fooled” that was a good one 🙂

  2. Saravanan says:

    @Vikram:
    Thanks for dropping by and commenting.

    Yeah i agree with you. I don’t think this is ethical. The big fat cats either ensure that the small players listen to them or squash them. As you say, ‘normalcy’ reigns no matter what happens to the market.

    I guess the balance will always be maintained when everything happens in a closed network.

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