> While this obviously contributed to rising prices, the report finds that company profits increased at a much faster rate than costs did, in a process often dubbed “greedflation.”
I think there is this expectation that companies "should" only raise prices necessary to cover their cost increases. But companies charge what the market can bear and, depending on the specific circumstances, this could be equal to, less than, or more than the cost increases.
To use a HN-friendly example, let's say AWS cuts their EC2 costs. If you're providing an undifferentiated computation service using EC2, you'll likely have to cut your costs or you will lose all your business to your competitors. If you're providing a highly differentiated SaaS product, you can probably keep the cost savings to yourself.
You can reason in the opposite direction for price hikes. Depending on the exact company in question, they could be in a privileged position of the supply chain or have marketing power that allows them to increase prices even more.
One main difference here is price stickiness [1], i.e. prices tend to be fixed for a period of time, even if the underlying economics has changed. I think this is underlying reason for perceptions of "greedflation" because, during period of inflation, prices become less sticky and companies use this to adjust prices to better match the underlying economics.
In a free and competitive markets, this would not have happened, or at least would quickly be corrected for by new sellers.
This is solid evidence that we do not have a free and competitive marketplace for most goods and services. That is the problem and its gets worse every day.
It still fucking sucks that price increases put even more pressure on people under and around the poverty line.
The economy isn't just some abstract numbers game, there are real people living in it.
The expectation that companies shouldn't juice more money out of customers who will suffer (or at the very least have to lower their living standards, which isn't as bad but is still not awesome) because of it is a very justified one.
There are no free lunches. The idea that inflation can be curbed by companies being more empathetic is wrong. If they don't raise prices during a spate of inflation, then they'll have to fire workers or make other cuts.
I think there is this expectation that companies "should" only raise prices necessary to cover their cost increases. But companies charge what the market can bear and, depending on the specific circumstances, this could be equal to, less than, or more than the cost increases.
To use a HN-friendly example, let's say AWS cuts their EC2 costs. If you're providing an undifferentiated computation service using EC2, you'll likely have to cut your costs or you will lose all your business to your competitors. If you're providing a highly differentiated SaaS product, you can probably keep the cost savings to yourself.
You can reason in the opposite direction for price hikes. Depending on the exact company in question, they could be in a privileged position of the supply chain or have marketing power that allows them to increase prices even more.
One main difference here is price stickiness [1], i.e. prices tend to be fixed for a period of time, even if the underlying economics has changed. I think this is underlying reason for perceptions of "greedflation" because, during period of inflation, prices become less sticky and companies use this to adjust prices to better match the underlying economics.
[1] https://en.wikipedia.org/wiki/Nominal_rigidity