Businesses can either be price setters or price takers. In a fiercely competitive environment where there is perfect competition, businesses are mostly price takers. Customer: "How much is this?" Shop: "$20.00" Customer: "Aiyoh, internet selling $10.00 only." Shop: "Oh... OK, $10.00." If I were the shop owner and if this were to happen on a daily basis, I have something to worry about. Of course, businesses could engage in anti competition moves and set prices if there are only a few players in the industry. So, in an oligopoly, there is always a temptation to fix prices. This, by the way, is illegal in many countries, including Singapore. A business is in a sweet spot if they are price setters and consumers are willing to pay a higher price for what they offer. Customer: "How much is this?" Shop: "$20.00" Customer: "Internet selling similar for $10.00 only." ......