Comment by dongobread

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.