DEFINITION of 'Fixing'

The practice of arbitrarily setting the price of a good or commodity. Fixing represents a refusal to allow the forces of a free market to determine the price of the good. It can be either legal or illegal depending upon who mandates the fix, such as the government or a group of merchants. Although, "fixing" usually refers to "price fixing," it can be applied to input costs or fixing supply. For example, governments can mandate the quantity goods produced in a region.

BREAKING DOWN 'Fixing'

Fixing can take many forms. OPEC artificially quadrupled the price of oil in the 1970s and effectively cut off its supply to much of the western world. Cartels are formed for the purpose of fixing the price of one or more of the goods that they produce, such as oil or other commodities. Capitalist governments also fix the prices of certain goods to promote smaller companies to enter the industry.

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