The going rate method of price setting is a method in which a firm fixes the price of its product largely according to the prevailing price charged by competitors in the market. The firm may charge the same price as its competitors, slightly more, or slightly less, depending upon its objectives, product quality and market position. This method is particularly common in markets where products are similar and where competitors closely observe one another’s pricing decisions. One major reason for the popularity of the going rate method is its simplicity. A firm does not have to undertake complicated calculations of demand, cost and price elasticity. It can observe the prevailing market price and use it as a reference point. This saves managerial time, effort and cost, especially for small and medium-sized firms that may not have sophisticated market research facilities. Another important reason is that the method