Price Setters And Price Takers
Providers and provider organizations can choose one of two major pricing strategies: they can be either price-setters or price-takers.
A price setter is a company that establishes its prices for products or services independent of those set by other market participants. On the other hand, a price taker is an entity that does not have the authority to affect pricing but instead takes its cues from the prices set by other market participants.
Price setters are more proactive, whereas price takers are more reactive. This is the primary distinction between the two strategies. Price setters are often better able to set prices that will optimize their profits because they better understand their costs and the market. Conversely, price takers might not have as much knowledge about their fees or the market. Thus they might wind up setting prices that are either too high or too cheap.
Each strategy has advantages and disadvantages. Price setters may be able to increase earnings, but if they establish prices that are thought to be too high, they face the danger of alienating customers. Price-takers may not always be able to capture as much profit, but they also avoid the risk of alienating customers.
In general, I believe that price setters are the best strategy for essential stakeholders. This enables them to establish pricing more aligned with their costs and greater control over their earnings. It’s crucial to remember that if prices are set excessively high, clients are likely to be alienated.
References
Bindseil, U. (2020). Tiered CBDC and the financial system. Available at SSRN 3513422.
Carey, G., Malbon, E. R., Weier, M., Dickinson, H., & Duff, G. (2019). Making markets work for disability services: The question of price setting. Health & Social Care in the Community, 27(5), e716-e723.
Gorodnichenko, Y., Sheremirov, V., & Talavera, O. (2018). Price setting in online markets: Does IT click? Journal of the European Economic Association, 16(6), 1764-1811.
Hinnosaar, T. (2019). Price setting on a network. arXiv preprint arXiv:1904.06757.
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Question 
It can be postulated that there are two scenarios when it comes to price setting by providers and provider organizations. Providers refer to those practitioners eligible to bill third-party payers for the services they provide to patients. Provider organizations are facilities where care is delivered to patients. The first scenario is that providers and provider organizations are considered “price takers,” in that the payers set reimbursement rates with little to no input from providers and organizations. The second scenario is that providers and organizations develop their prices, and payers are expected to pay these rates. These strategies will be explored in this week’s discussion.
Price Setters And Price Takers
- Briefly discuss what it means to be a price setter or price taker, the strategies employed in both approaches, and a clear listing of the pros and cons of each price-setting plan. After weighing the pros and cons of each, which direction best meets the needs of the key stakeholders?