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Why is inflation so sticky? It could be corporate profits

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Re: Why is inflation so sticky? It could be corporate profits

#161

Post by lores »

doublespanner wrote: post #105
mitthrowaway2 wrote: post #88

Earlier quoted context omitted.

Absolutely. But for competitors to raise margins bilaterally requires cooperation, because each side can take market share by keeping prices low. I just wonder if the cooperation might come in the form of, say, one powerful shareholder of both competitors making calls to the boards of directors of both competing companies. Unexpected consequence of passive investing?

Only if the competition thinks the increase in share is worth more than the increase in per unit profit. And depending on the industry, there might not be much more to be gained by scaling up. Going from 45% to 60% of the market might not be more profitable than an extra few percent per unit.

That's hitting the nail squarely. If your margin is 5%, going to 10% is far better and far easier than doubling your market share.

Re: Why is inflation so sticky? It could be corporate profits

#162

Post by piva00 »

0xy wrote: post #149
piva00 wrote: post #112

Earlier quoted context omitted.

I feel we are entering seriously dangerous territory when someone is defending monopolistic practices because during the time of a monopoly consolidating itself the customers get a brief period of lowered prices that the monopolistic forces use to undercut all competitors.

Amazon is not a monopoly, and the second they raise margins they'll lose business to eBay, Shopify, Walmart, Target and others. Do you think Amazon has 0-5% margins because they're generous or because it's a deliberate strategy to attract and retain customers? Customers would scramble if Amazon margins were 50%.

Monopolistic practices is the term I used, exactly to not call Amazon a monopoly because they are not one yet. They are engaging in monopolistic practices though (price dumping causing stifled competition, etc.).

Re: Why is inflation so sticky? It could be corporate profits

#163

Post by Already__Taken »

politelemon wrote: post #99

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

and ee took CPI 10% + 3.5% profit.

I don't know how that's legal when you look at how the CPI is calculated and it included these companies already. They're adding onto their own adjusted price inflation.

Re: Why is inflation so sticky? It could be corporate profits

#164

Post by willis936 »

gfdsgfsdgfs wrote: post #117
mjevans wrote: post #97

Earlier quoted context omitted.

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

You'll get more shortages and higher inflation with your solution.

Builders won't build less if it's people paying rather than corporations. There isn't going to be a shortage of demand until there is an increase in supply because housing is inelastic.

Re: Why is inflation so sticky? It could be corporate profits

#165

Post by bell-cot »

mjevans wrote: post #97
paxys wrote: post #58

Their argument is basically that while normally a company raising prices would mean that some of their customers move to a competitor, in today's environment there is an implicit agreement that every company will keep prices high. So are they saying that the free market is basically not a thing anymore because of covid, and no company wants to get an edge over its competitors by undercutting on price despite having r…

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

Notice how many of those things have highly inelastic supply, are monopolies (or close), or have really bloated "value adding" supply chains.

NIMBYs and such ensure that more housing can't be built, at scale, in areas with high rents, to have normal supply/demand dynamic.

Food is relatively cheap, if you cook for yourself and don't mind a lot of beans, rice, bread-machine bread, peanut butter, etc. If you want heavily processed or prepared food, or restaurant food...that's an order of magnitude more expensive. And many parts of the food industry are far too consolidated to be competitive.

Etc.

Taxing the hell out of profits sounds great...but in sectors where the real problems are strangulated supply, monopolies, and massive processing in the supply chain - it won't do much good.

Re: Why is inflation so sticky? It could be corporate profits

#166

Post by amiga-workbench »

politelemon wrote: post #99

In the UK there's a company called Virgin Media (broadband, TV, phone provider) which has been completely blatant about it. They recently informed all customers that going forward they will annually be increasing prices by RPI + 3.9%. https://www.virginmedia.com/mobile/annual-rpi-price-increase https://www.ispreview.co.uk/index.php/2023/01/virgin-mobile-...

I jumped ship from them before Christmas. I'm with YouFiber now, I get symmetric gigabit for £35/m and £5/m for a static IPv4 address that opts me out of CGNAT. The first 3 months were free.

Re: Why is inflation so sticky? It could be corporate profits

#167

Post by edrxty »

biscottigelato wrote: post #157

Tesla cutting prices aggressively at the expense of both their own margins, but also of other automakers having their market share and revenue shrinking massively, puts this WSJ theory immediately to bed.

That would be cool except they're now raising prices

https://www.reuters.com/business/autos-transportation/tesla-...

Re: Why is inflation so sticky? It could be corporate profits

#168

Post by listenallyall »

shoubidouwah wrote: post #136
mjevans wrote: post #97

Earlier quoted context omitted.

Things I pay a lot for: * Rent (they're all high; and can't afford to buy anywhere near where I work) * Food (prices are pretty much the same everywhere) * Internet (Cable's the only modern-speed option where I currently rent) * Energy / Gas - either utilities or again, the same everywhere I think most everyone else is in the same boat. I can scale down some of these a little bit, but they're all fairly __inelastic__…

the rent, as always: https://en.wikipedia.org/wiki/Law_of_rent and the companies do not want to compete: most modern large companies only exist as a _vehicle for investment_, and as such compete for shareholders, not consumers. Due to this, short-termism dominates: average CEO stays 4 years at a given company, and performance of the company after they leave is largely uncorrelated with their carreer success, while sh…

The problem with your (and many others) "short-term thinking" argument is that the assumed long-term consequences -- you wrote "crash everything" -- doesn't happen. We went from 2008 to now, 15 years, with corporate profits and stock prices zooming straight up. Even shutting down the globe was just a temporary blip. Highly aggressive corporate activity, massive expansion of economic inequality, yet the longest non-recessionary period in this country's history.

Re: Why is inflation so sticky? It could be corporate profits

#169

Post by andromeduck »

_hypx wrote: post #32
silisili wrote: post #3

It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.

Some companies are playing with fire by charging so much. A notable example is Nvidia, which is basically crippling its own lineup with their weak specs and high prices.

That's more because supply shortage from the bens of moore's law and design costs are still exponentially growing so there's incentive to slow walk your development/release to maximize lifetime value.

Re: Why is inflation so sticky? It could be corporate profits

#170

Post by z3t4 »

Monopolies and cartels love inflation as they can increase the prices.

One interesting thing is that when prices increase, the raw prices decrease. So if you are a middle man you will make huge profits. Demand drops as prices increase. But producers don't want to lower their production. We have a lot of automation in the production chain, so while building a new factory cost a lot, dropping production output from 100% to 90% will save very little money. Over-production causes prices to fall.

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