Overheard on NPR

I've only heard bits and pieces of the NPR interview I'm writing about; I don't know who the interviewee was. The broad context of what he was talking about was anti-trust laws, WalMart, and the like. At any rate the interviewee (for convenience, let's call him Dan) decried the current state of affairs in which manufacturers are no longer in power to set prices of their own products. Dan said that manufacturers should have that power but they don't anymore, because lots of times prices are set by a long chain of intermediaries.

What Dan said is definitely wrong, but it could be wrong in one of two ways, depending on what he means by "price." If he means the final price at which the transaction of a certain good is finalized, then he's wrong because manufacturers never had the power to set that price to begin with. Market price of something isn't set by a single entity, but by a bargaining process between all participants of the transaction: manufacturers, sellers, and buyers. Sure, the manufacturer gets to set the asking price; but if she happens to set it below or above the market-clearing rate, she'll have to change it or go out of business. In other words, she doesn't really set it.

But maybe "asking price" is what Dan meant all along. In that case what he's saying is that the asking price of a product should always be set by its manufacturer, and not by trade intermediaries. For example, if I manufacture a tea-pot, then I should get to have all say in determining what price buyers should be asked to pay for it, and not WalMart, if WalMart happens to sell my teapots to the larger public. That's really just another way of saying that intermediaries shouldn't be allowed to profit from what they do (because if they're not free to charge prices different than what they pay the manufacturers, they can't). Which is really just another way of saying that intermediaries do not provide any useful service. For example, Amazon.com is completely useless; after all, it doesn't make anything, it only sells stuff it buys from other people.

How about some Econ 101, Dan?