The interesting thing about the graph is, as far back as it goes, the contributors fluctuate but seem not unusual or unexpected. So companies are not extraordinarily greedy right now, they act the same as ever, just more do so.
My personal, uneducated, unverified hypothesis was that companies overcompensate price increases for three main reasons:
* They assume consumers dislike many small price increases. The current increase, therefore, has to last until the next oportunity.
* They expect an economic downturn, and want to extract as much money in preparation of the reduction (ironically fueling the downturn).
* They use the opportunity to adjust to what they expect the market would accept, because they assume PR backlash if they do it without a reason.
I think the last one is a form of "market inefficiency" but one that generally benefits consumers.
> My personal, uneducated, unverified hypothesis was that companies overcompensate price increases for three main reasons:
profit-maximizing sellers can only increase prices if demand rises, otherwise they will sell fewer units at the higher price (and if they could've made more money selling fewer units at a higher price then we can assume that they were already doing that because they are profit maximizing)
the only way that demand can rise (allowing prices to rise) in unison is if there is more money going around, which is what happens when the money printer goes brr, which it did https://fred.stlouisfed.org/series/M1SL
Your theory is assuming I'm using more toilet paper than usual, or that my budget for toilet paper has increased in the past 2 years, which is just patently ridiculous.
No, this is not a joke. I wipe the same as pre 2020. I had a couple of pay raises since then, but I still buy the same amount of TP, and the price is still 50% higher than before.
My personal, uneducated, unverified hypothesis was that companies overcompensate price increases for three main reasons:
* They assume consumers dislike many small price increases. The current increase, therefore, has to last until the next oportunity.
* They expect an economic downturn, and want to extract as much money in preparation of the reduction (ironically fueling the downturn).
* They use the opportunity to adjust to what they expect the market would accept, because they assume PR backlash if they do it without a reason.
I think the last one is a form of "market inefficiency" but one that generally benefits consumers.