PDSnet Glossary

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Definition

An entity or individual with a sufficient monopoly in a product to increase prices. When there is strong demand for a product or a good brand loyalty, then the manufacturer can push their prices above those of their competitors. This can be seen with Coca Cola which is generally priced at a higher price than its main competitor, Pepsi, and other colas, because of its strong brand awareness. Price making can also occur in the share market in relatively thinly traded shares where one party has control over a significant percentage of the available scrip and there is a small free float. In general, we advise investors to stay away from thinly traded shares because of the difficulty of selling them when they reach their stops. This is the opposite of a "price taker" which is an industry where the price of its products is not under its control. Typically, mining companies are price takers and have to accept the internationally set price for their commodity.

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