Forum Archive Index - September 2000

[oli@vodafone.net.nz]

***Charlie Brown, we are agreed on economic principles, but our semantics 
differ.
 
My proposition:
You are the only buyer, wandering a street of fish merchants.  There are 30
of them all trying to sell fish.  
Who determines the price? - obviously the buyer.  We agree on that one.  
Our difference is that you call this  a buyer's market, because the buyer 
controls
the price, whereas I call this a seller's market, because there are more sellers
than buyers.  No matter what we call it, the buyer will determine the price


As for your proposition as to who has the power, it is obvious that we need
more information.  To call it an accept/reject market is simplistic.  
EXAMPLE: I hold some shares in X.  I think they are worth $1.  I ring the broker
to get the market depth, and find that there is one buyer at 90 cents, and 
hundreds
of sellers between 92c and $1.  Obviously the buyer has the control here, as
there is little likelihood that the seller will get $1 anytime in the near 
future.
 The seller will either have to hold on to the shares, or accept a price closer
to or at 90c.


"Now if I was to say "it's a sellers' market", I would be saying that there

are more sellers than buyers, and the price was falling because the buyers 

dictated the terms.  In a "sellers' market", buyers rule the day."
If I was a seller in this market (supplier) and I was trying to obtain the 

highest price for my commodity (in this case shares) then I would expect "a

sellers market" to be when I could attain this price (As the supplier I have

the advantage as I have the good). On this analysis if I was a buyer then 
(ie demanded the good)(subject to my price ceiling) I would be (could be) 
paying too much for the shares unless I believed they would appreciate in 
value or provided a favourable yield.

Hence in a sellers market a scarce resource (the shares)will force up the 
price buyers are prepared to pay for them.  This can not mean it is a buyers

market therefore.


Proposition:  When you are selling, do you hold the power or does the buyer?

  You put your sell order in and it is simply an accpet or deny system isn't

it.
Conclusion:  In a sellers market, sellers rule the day.



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