Blog 9: Nike vs. The Egg

Price taker or price searcher, which one holds the upper hand? If you’re looking for a market with a steady price range, low per unit revenue, and a sluggish return on investment (ROI), then the price taker market is for you. If you more the adventurous type with an ambitious attitude who would like a higher per unit revenue, a greater risk factor and a quicker ROI, more than likely the price searcher market is for you. A great example of the price searcher would be Nike shoes. Nike entered the market back in the 1960’s when it began making running shoes. Since there was a demand for the shoe and little to no competition, Nike was able to set prices to whatever level it felt would redeem the highest possible ROI without shocking the market. Today, Nike competes with other companies and holds its own. As a price searcher, the demand for a product is elastic. When the price of the good or service goes up, the demand will go down. On the flip side, a farmer whose main source of income is selling eggs is a price taker. His market is inelastic. No matter what the price of eggs is the demand is going to be there. But he does not set the price of his product, the market sets the price for him. Even if he tries to raise the price of his eggs it will not make a significant impact and will eventually bring his price back down to what the consumer is willing to pay. So how would the farmer be able to bring in higher revenue? One way is by producing more of his product and finding a way to produce it more efficiently. In order to do this he would have to upgrade his equipment. This would mean he would have to invest and sacrifice time and money that would other wise be used for everyday living. So where is the payoff? Should he invest in the upgrade or maybe raise more chickens in order to produce more eggs?