MRP vs Fixed Price – Difference Between MRP and Fixed Price

Several everyday concepts that circle economics may be slightly difficult for some individuals to understand. The terms MRP and fixed price are two such concepts that have attracted considerable controversy. While the terminologies may seem identical, MRP and fixed price vary on several grounds.  

MRP vs Fixed Price 

The main difference between MRP and fixed price is that MRP is the maximum price at which a commodity or a service can be sold. On the other hand, fixed price refers to the non-negotiable price at which a commodity can be sold or service can be availed.

MRP and Fixed Price

MRP is the highest price at which a commodity can be sold by the retailer. Usually, the Maximum Retail Price of every packaged commodity is listed on its packaging. While countries like India and Bangladesh have adopted the MRP system, there are several other countries where the retailers determine the price of the commodity. The validity of MRP has been intensely debated due to its limitation on the profits of retailers. 

Fixed price refers to a non-bargainable sum of money to purchase a particular commodity or avail a service. The fixed price of a commodity is usually determined by the government or the regulatory authorities or the seller of a service. The most lucrative feature of fixed price is that it offers uniformity in the selling and buying process. 

Comparison Table Between MRP and Fixed Price 

Parameters of ComparisonMRP Fixed Price 
Coverage MRP is practiced only in India. The policy of fixed price is prevalent in almost every country of the world. 
Flexibility A seller can sometimes sell a commodity at a price lower than the MRP.Fixed price is non-changeable. 
Purpose The main purpose of MRP is to ensure that the sellers don’t exploit the consumers to earn higher profits. The main purpose of fixed price is to ensure uniformity of goods in different areas. 
Determiner MRP is determined by manufacturers. Fixed price is determined by government authorities or the price regulation agencies. 
Examples Some MRP items are bicycles and air conditioners. Some fixed price items are salt packets, matchboxes, and cookie cans. 

What is MRP?

MRP stands for Maximum Retail Price. By definition, MRP refers to the highest price at which a product can be sold. MRP is a practice followed by India. There are certain situations wherein the retailer may choose to sell the product at a price lower than the MRP. Sometimes, sellers may choose to sell their products below the MRP to attract more customers. 

The main objective behind introducing the MRP system was to increase the awareness of customers regarding the price of various products. At the same time, the Maximum Retail Price policy aims at discouraging suppliers from storing goods to increase prices in the future. Today, every item from a packet of candies to an air conditioner has its MRP listed on the packaging. 

The manufacturers must print the MRP of a product on its package. However, MRP has been criticized on several grounds. It is suggested by some that this system stands incompatible with the free market system. The primary reason for this stance is that it is manufacturers who have the right to determine the profits that the retailers are going to make. 

In addition, retailers may choose to increase their profits by charging overhead costs. Examples of such instances include charging for cooling the cold drinks, or the storage costs of commodities. Non-packed commodities like services or essential commodities sold loose are usually not charged the MRP. Thus, the policy of Maximum Retail Price continues to be a conflicted practice.

What is the Fixed Price?

Fixed price refers to the price allotted to a commodity or a service that is not open to bargaining. There can be several reasons why the price is fixed. For instance, the seller may choose to set a particular price or because the authorities under price control have chosen to regulate that price. Although bargaining is a common practice in some countries of the world, fixed price tends to be the norm in most others.

The major advantage of fixed price is that it is a uniform price for all customers. For instance, the price of a packet of chips sold in the general store is the same for all consumers. Several agents determine the fixed price. The most credible source is the government which fixes the price for a particular service such as governmental services. 

The word fixed price is speculated to have originated in the period 1905-1910. The fixed price of a commodity or a service is subject to change across different regions and countries. For instance, a packet of biscuits that may cost one dollar in the United States of America may round up to eight rupees in India. 

A fixed price shop or mall often offers a more convenient shopping experience than a bargaining shop. The primary reason for this is that the customer has no choice of bargaining. Therefore, fixed price offers the sellers a pre-determined price for their commodity or services.  

Main Differences Between MRP and Fixed Price

  1. MRP is the upper limit price of a commodity whereas fixed price is the non-changeable price of a commodity or service. 
  2. While MRP is determined by the manufacturers of the commodity, fixed price is determined by different authorities such as the government or the international price regulation agencies. 
  3. MRP is open to bargaining in some scenarios. On the other hand, fixed price is non-negotiable. 
  4. MRP is a policy practised only in India, whereas fixed price is commonly found in countries like the United States of America and Canada. 
  5. Examples of MRP items are refrigerators and washing machines. In contrast, examples of fixed-price items are sugar and oil.  

Conclusion

Therefore, MRP and fixed price vary on several grounds. Maximum Retail Price is a price open to bargaining as opposed to the fixed price. As indicated by the name, fixed price doesn’t offer a choice of price negotiations to the buyer. 

Both MRP and fixed price are popular policies in the consumer market. While some countries choose to adopt the MRP policy, others stand by the fixed price practice. Nonetheless, there are several differences between the features of MRP and fixed price.  

References

  1. https://en.wikipedia.org/wiki/Maximum_retail_price 
  2.  https://en.wikipedia.org/wiki/Fixed_price 
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Editorial Staff at Ask Any Difference is a team of experts in the field of "Difference Between" topics and led by Sandeep Bhandari, Piyush Yadav and Chara Yadav. Trusted by over 1.5 million readers worldwide
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