Comment by megaman821

2 years ago

What makes more sense?

(1) The majority of companies expected their input costs to rise so quickly increased prices to compensate, when they didn't rise as much as expected they slowly lowered prices to remain competitive. Since nearly everyone was reading the market the same way, they weren't punished for this.

(2) Companies became really greedy a few years ago, and increased prices just because they could. Recently they have been less greedy, and prices have come down.

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megaman821

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anigbrowl  2 years ago

I lean toward (2), and I think we have strong evidence for this in the form of 'shrinkflation', where firms redesigned their packaging to provide less product while maintaining prices or brand identity (eg making the packaging appear to be the same size while having lower product weight/volume). The fact that changing product packaging requires a significant investment in adjusting production lines says to me that it was a proactive decision rather a simple reaction to market conditions.

By contrast, eggs went up quite a bit a couple of years back due to a combination of increased demand and a coinciding outbreak of avian flu. But while one could feed chickens less or selectively breed for smaller eggs, the actual manufacturing of the egg is basically up to the animals rather than the accountants. If you crack open a fresh egg you pretty much know what you're getting and it isn't easy to change. It's not feasible to sell cartons with only 5 or 10 eggs rather than the more common amounts of 6 or 12 (or 30 if you have an insatiable appetite for them as I do). So there normal forces of supply and demand have reasserted themselves and prices have (somewhat) returned to where they were a few years ago. It's been easier to observe changes than for items like beef which I buy more intermittently.

  • falcolas  2 years ago

    It's amusing to point out eggs as some kind of holy grail of how price moves naturally, when the two largest egg producers (Cal-Maine Foods and Rose Acre Farms) were just fined in federal court for price fixing.

    • anigbrowl  2 years ago

      That's interesting and sort of amusing, but I didn't notice as I buy from fairly small farms.

      It's not that I think eggs are immune to price fixing, but rather that the packaging of fresh eggs isn't easy to change; the eggs themselves can't be altered and while you could sell fewer of them per box consumers (in the US at least) are used to multiples of 6 and would immediately notice. In contrast you could reduce the volume of, say, detergent but redesign the container, and many consumers might not notice that they were getting 6-7% less.

      What I'm getting as is that while the causes of egg price changes might be legit or greed, it isn't as easy to hide the price changes from the consumer as when you operate a whole production line and can alter the appearance and volume of the package itself.

      1 reply →

    • autoexec  2 years ago

      Because they're such total dicks, here are some Cal-Maine brands I go out of my way to avoid when I get eggs in stores:

        4grain cage free
  Egglands Best
  Farmhouse Eggs
  Land O Lakes
  Fassio Egg Farms 
  Rocky Mountain Eggs
  Red River Valley Egg Farm
  Meadowcreek foods
  Specialty Eggs Inc
  Southwest Specialty Eggs Inc
  ProEgg Inc.
  American Egg Products Inc. 
  Texas Egg Products LLC
  Wharton County Foods
  Benton County Foods
  Sunups 
  Sunny Meadow

    • breakyerself  2 years ago

      They're just the ones who got caught. A lot of markets have only 2 or 3 major players. With so few players they could cooperate to raise prices without doing anything more than observe what each other are doing and responding accordingly. Price being the only means of communication or coordinating between the players.

    • Aunche  2 years ago

      Kelloggs, General Mills, and Nestle hired lawyers that appealed to populism to convince jurors that egg producers price fixed with a probability of at least 51%. That's hardly proof of price fixing.

      11 replies →

dongobread  2 years ago

I don't think either of those theories is right. (1) doesn't explain the rise in corporate profits, and (2) is of course silly.

Here is my theory:

Consumers generally have an "acceptable" price range in their head for each product. When most retailers have prices within that range, it is really hard for a single company to raise prices above that range, as they'll lose a lot of business. But, COVID forced input prices to rise and fluctuate quite a bit. Once companies raised prices to account for input costs, consumers lost their sense of "normal". Then, companies were able to get away with charging prices even more, and could get away with raising prices above their competitors without losing any business.

kypro  2 years ago

Actually, I think it's a little different. During the pandemic personal savings rates exploded and credit was extremely cheap. Companies realised that customers had plenty of cash in their pockets so could afford to raise prices without the demand destruction you'd typically expect so they did.

You're right in the sense that this idea that corporate psychology just randomly changed over the last few years makes just as little sense as saying customers skimping and building up savings in 2020-2021 contributed to inflation in 2022.

danaris  2 years ago

I would say (3):

For many years, consolidation, deregulation, and other factors have led to a gradual but marked decrease in genuine competition in all sectors. As long as things were still trundling along as normal, the people at the top didn't really think about this too hard.

Then COVID came. Between supply shocks, lockdowns, and various other temporary effects, we were told to expect inflation. Indeed, for a time, there were genuine, honest-to-god price spikes rippling through the economy directly because of the pandemic.

But the causes of those spikes subsided.

And the prices didn't come back down all the way.

The people at the top realized that, because of how much we were all being told to beware of inflation, they could simply make the inflation happen and pocket the extra, and no one would notice.

And for...I forget exactly how long, but well over a year, at least, the public broadly didn't notice.

Now, we're noticing, and trying to make clear that this is what's happening.

But people like you are still trying to act like this is impossible, companies can't really cause inflation purely by raising prices, that would be ridiculous, this is purely the aforementioned price shocks (that ended years ago, while the inflation didn't).

layoric  2 years ago

Rise like rockets, fall like feathers as they say. Out of interest, in what markets have you seen prices come down?

Aeolun  2 years ago

You mean it was just a happy little accident for companies that increasing prices by a lot now instead of gradually makes them a bunch of free money?

HHC-Hunter  2 years ago

I'll take window number 2, whilst continuing the notion that they haven't lowered their greed.

ren_engineer  2 years ago

companies are always in maximized greed mode, governments are blaming them for stupid monetary policy and poor handling of COVID which resulted in tons of supply chain issues that allowed smart companies to maximize profits even more

soupfordummies  2 years ago

As for (2) did prices even really "come down" or did they just "stop rising so quickly"?

In my experience around here, MOST things have nearly DOUBLED in price since COVID. And the prices aren't going down. They're just holding steady-ISH