Why the Market price for the risk will become lower due to price taking behaviour of some investors?
The market price of risk is lower for the price affector(Mutual Funds, Large Institutions) since the fact that they try to maximize the utility on their Investments. They hold less of Risk free asset and more of risky asset than a price taker(an Individual), which simply forms a CAPM equation. Holding more of risky asset and less of risk free asset shows they have more risk taking ability and thats why try to maximize utility.