Thinking like an economist is hard. We have deep seated (possibly innate) intuitions about fairness and reciprocity. My econ brain tells me gouging is good because it rations demand and rewards supply, but every instinct I have tells me it's exploitation. Ironically in the case of grocery stores, we have recent evidence that they kept prices below the market clearing price, which is why you couldn't get toilet paper.
Sadly it is not just politicians that seed inflation confusion in order to deflect responsibilities; even the financial press contributes. The Wall Street Journal a couple of days ago posted an article saying “Whole Foods Market is asking suppliers to help the retailer bring prices down on packaged groceries as inflation moderates.” Two things struck me. First, this feeds right into the narrative you just debunked, namely the idea that final consumer prices can somehow be the result of negotiation or collusion between wholesalers and retailers. Second, the amusing circularity of the argument: “please lower your prices because inflation is coming down” - which again echoes the idea of inflation as cover for individual pricing decisions independent of costs and competition.
It is too common in reporting. I mean these discussions are obviously part of negotiations and they affect prices on some margins. But the big forces are beyond anyone’s control.
This is the second article of yours that I've read, and the second time I've seen pretty significant functional misunderstandings.
"If market power were a big deal, companies wouldn’t need the cover of inflation to raise prices. Monopolies can pass on their cost increases and customers can’t flee to other sellers. Under competition—under supply and demand—firms can only raise prices when others firms costs rise."
I would strongly suggest a) learning about revenue growth management and b) speaking with people who are actually involved in manufacturer and retailer negotiations to learn how prices are set in American commerce.
I took one course on macro 40 years back, but I understand in micro, that you learn how many competitors it takes to not be an oligopoly - and Canada's grocery chains don't qualify?
Thinking like an economist is hard. We have deep seated (possibly innate) intuitions about fairness and reciprocity. My econ brain tells me gouging is good because it rations demand and rewards supply, but every instinct I have tells me it's exploitation. Ironically in the case of grocery stores, we have recent evidence that they kept prices below the market clearing price, which is why you couldn't get toilet paper.
in Canada, the NDP have been obsessively yelling about how greedy grocery companies ("big grocery") have been gouging consumers for the past 2 years
It blows my mind that this works, and that it's the party's main talking point. But Canadian socialists keep gobbling it up... wild.
It's never a theory. Just a blame game
Sadly it is not just politicians that seed inflation confusion in order to deflect responsibilities; even the financial press contributes. The Wall Street Journal a couple of days ago posted an article saying “Whole Foods Market is asking suppliers to help the retailer bring prices down on packaged groceries as inflation moderates.” Two things struck me. First, this feeds right into the narrative you just debunked, namely the idea that final consumer prices can somehow be the result of negotiation or collusion between wholesalers and retailers. Second, the amusing circularity of the argument: “please lower your prices because inflation is coming down” - which again echoes the idea of inflation as cover for individual pricing decisions independent of costs and competition.
It is too common in reporting. I mean these discussions are obviously part of negotiations and they affect prices on some margins. But the big forces are beyond anyone’s control.
This is the second article of yours that I've read, and the second time I've seen pretty significant functional misunderstandings.
"If market power were a big deal, companies wouldn’t need the cover of inflation to raise prices. Monopolies can pass on their cost increases and customers can’t flee to other sellers. Under competition—under supply and demand—firms can only raise prices when others firms costs rise."
I would strongly suggest a) learning about revenue growth management and b) speaking with people who are actually involved in manufacturer and retailer negotiations to learn how prices are set in American commerce.
Thanks for reading and for the tips!
What would you conclude about firms whose profit margins have risen by more than price inflation?
https://www.ctvnews.ca/business/canada-s-top-3-grocers-posted-higher-profits-this-year-compared-to-5-year-average-report-1.6137199
I took one course on macro 40 years back, but I understand in micro, that you learn how many competitors it takes to not be an oligopoly - and Canada's grocery chains don't qualify?