Grocery Surprises, What's Got Your Goat With High Price?

[samhexum]

On 12/1/2023 at 3:45 AM, sync said:

There have been news bits that Five (5) ShopRite locations are closing in the New York upstate area.

I guess it's back to Stop 'N Shop.

Did they wind up closing your local store?

[+ sync]

14 minutes ago, samhexum said:

Did they wind up closing your local store?

No, it's still operating for now, but for one recent order it was out of eggs again.

I guess it's going to be "touch and go" for awhile.  🤞

[samhexum]

Grocery store owners clapped back after Whoopi Goldberg on ABC’s “The View” called them “pigs” over food inflation — and raised concerns that the name-calling could expose store owners to further violence, The Post has learned.

The comedian claimed “the folks that own the groceries are pigs” as she blamed them for rising prices at supermarkets on the Thursday show — a day after Donald Trump won the presidential election by hammering on inflation in his campaign.

“Your pocketbook is bad, not because the Bidens did anything. Not because the economy is bad. Your grocery bills are what they are because the folks that own the groceries are pigs,” Goldberg said on the popular program.

The National Grocers Association, which represents more than 21,000 stores

“Statements that falsely depict grocers as ‘gouging’ not only exacerbate these tensions but also risk further harm to these frontline workers who have continued to serve the public through challenging times,” according to the letter.

Food inflation is the result of “broader economic issues,” including rising labor costs, Ferrara wrote.

ABC didn’t immediately respond to a request for comment.

“We are totally outraged by the comments,” Zulema Wiscovitch, who owns two Associated stores in Rosedale, Queens, and Brownsville, Brooklyn, and is co-president of Associated Supermarket Group, told The Post.

A clip of Golberg’s comment went viral in the grocery community, Wiscovitch said, with many incensed that family-owned businesses are being targeted by a celebrity who is inciting “hate” against their employees.

“Grocers are paying higher prices from manufacturers,” Wiscovitch said.

“It shows a lack of understanding of what’s going on with the economy,” she added. “For us to receive this kind of attack from a public figure is totally unacceptable.”

[Lotus-eater]

Retail grocers have been subject to intense competition from Aldi, Walmart, Amazon, Target, Costco, etc., so it's hard to believe that there was collusion among retailers to raise prices. 

[+ Lucky]

36 minutes ago, Lotus-eater said:

Retail grocers have been subject to intense competition from Aldi, Walmart, Amazon, Target, Costco, etc., so it's hard to believe that there was collusion among retailers to raise prices. 

The stores you mention have also raised prices. I don't shop Aldi so I don't know about them, but they are a minor player.

[Lotus-eater]

The issue is whether retail grocers colluded to raise prices or simply passed along price increases from producers. Standard economic theory says that in a competitive market, retail grocers would be price-takers, not price-makers. Aldi is ranked #13 nationally (1/3rd of grocery shoppers admit to shopping there) and growing rapidly.

Edited November 8, 2024 by Lotus-eater

[+ ApexNomad]

While grocery price increases are influenced by global and logistical issues—such as the pandemic, war, labor shortages, and supply chain disruptions (hurricanes, etc.)—there is also evidence that corporations have kept prices high, leveraging both market power and the narrative of inflation for profit. Some economists and consumer advocates argue that corporations, particularly in monopolized markets, are using the inflationary environment to justify price increases beyond what’s necessary (aka, Greedflation Theory). This narrative has gained traction as companies report strong earnings while consumers face high costs.

[Lotus-eater]

13 minutes ago, ApexNomad said:

While grocery price increases are influenced by global and logistical issues—such as the pandemic, war, labor shortages, and supply chain disruptions (hurricanes, etc.)—there is also evidence that corporations have kept prices high, leveraging both market power and the narrative of inflation for profit. Some economists and consumer advocates argue that corporations, particularly in monopolized markets, are using the inflationary environment to justify price increases beyond what’s necessary (aka, Greedflation Theory). This narrative has gained traction as companies report strong earnings while consumers face high costs.

Greedflation is a nonsense idea, particularly in the case of grocery retailers because there is no reason to believe that there is market power when there are so many competitors. The greedflation narrative in fact relies on claims of concentrated markets among producers of food, not retailers. Whoopi is clueless.

[+ ApexNomad]

35 minutes ago, Lotus-eater said:

Greedflation is a nonsense idea, particularly in the case of grocery retailers because there is no reason to believe that there is market power when there are so many competitors. The greedflation narrative in fact relies on claims of concentrated markets among producers of food, not retailers. Whoopi is clueless.

I don’t take economic advice from Whoopi either, but there’s more to this topic than just dismissing it as “nonsense.”

Greedflation is a complex concept, and it’s important to separate the roles of grocery retailers and food producers. Food inflation stems from multiple factors, like labor shortages, transportation costs, and rising raw material prices. Some economists argue that certain companies—especially at the production level—use inflation as cover to elevate prices beyond cost increases, which is the basis of the “greedflation” argument.

In grocery retail, competition should, in theory, keep prices in check. However, the influence of major players, like Walmart and Kroger, who control a large share of the market, can affect pricing on a broader scale. While they don’t hold monopoly-level control, their significant market share allows them some price-setting power.

Companies across the food supply chain (from production to retail) have reported strong earnings during this period, which suggests that prices could be elevated beyond what input costs alone would justify. This issue is nuanced, and examining data across the supply chain is more constructive than dismissing it outright.

[Lotus-eater]

47 minutes ago, ApexNomad said:

I don’t take economic advice from Whoopi either, but there’s more to this topic than just dismissing it as “nonsense.”

Greedflation is a complex concept, and it’s important to separate the roles of grocery retailers and food producers. Food inflation stems from multiple factors, like labor shortages, transportation costs, and rising raw material prices. Some economists argue that certain companies—especially at the production level—use inflation as cover to elevate prices beyond cost increases, which is the basis of the “greedflation” argument.

In grocery retail, competition should, in theory, keep prices in check. However, the influence of major players, like Walmart and Kroger, who control a large share of the market, can affect pricing on a broader scale. While they don’t hold monopoly-level control, their significant market share allows them some price-setting power.

Companies across the food supply chain (from production to retail) have reported strong earnings during this period, which suggests that prices could be elevated beyond what input costs alone would justify. This issue is nuanced, and examining data across the supply chain is more constructive than dismissing it outright.

Large size by itself is not proof of price-setting power. There is no clear correlation between market concentration and higher markups. So color me highly skeptical.  And as The Economist pointed out, people are confusing cause and effect. The root cause is not to be found in the morality tale of greedy corporations but rather the government rapidly spending trillions of dollars when there were major supply constraints.

Edited November 9, 2024 by Lotus-eater

[mike carey]

It's easy to dismiss Whoopi as clueless but doing so assumes that she is sounding off on her theory of life, the universe and everything. Maybe she is, but more likely on any programme like the ones she appears on there are researchers and producers who are setting the topics she raises, to air a bigger story that the network wants to promote (or provoke) discussion of (and appears in this case to have succeeded in doing). So it's potentially naive to dismiss something as just her uninformed opinion.

The role of corporations in setting grocery prices is such an issue as it's part of a wider concern about inflation. It's not a perfect market, so supply and demand are not the only things in play. Retailers, processors and food producers all have a stake in the market (in some cases a single corporation may own producers and processors in the same commodity). The bigger the player the more they can be a price setter, and the closer to a monopoly or an oligopoly there is, the greater control over either the prices they pay for inputs or that they charge for their product. A hypothetical 'Big Egg' would be able to set what it pays farmers, and set what it can charge wholesalers and retailers (a Walmart may be able to force some change but smaller players may not). Does it happen in the egg market? Who knows. And in any other grocery line? Maybe. But does market power allow some corporations to set prices without regard to costs. Of course it can.

[+ ApexNomad]

20 minutes ago, Lotus-eater said:

Large size by itself is not proof of price-setting power. There is no clear correlation between market concentration and higher markups. So color me highly skeptical.  And as The Economist pointed out, people are confusing cause and effect. The root cause is not to be found in the morality tale of greedy corporations but rather the government rapidly spending trillions of dollars when there were major supply constraints.

The assertion that “there is no clear correlation between market concentration and higher markups” has been widely debated. While it’s true that market concentration doesn’t always guarantee price increases, there is significant evidence suggesting that in certain sectors, concentrated markets can indeed lead to higher prices.

For instance, in the food processing industry, companies like Cargill, Tyson Foods, and General Mills have seen increased control over food commodities such as meat, grains, and packaged goods. Research by economists like Jan De Loecker and Jan Eeckhout shows that when market concentration increases, these companies are often able to raise prices beyond what would be expected due to increases in production costs alone. Their work demonstrates that firms in more concentrated industries have the ability to raise prices through their pricing power, leading to higher markups and profit margins. Cargill, for example, has control over much of the global grain market and can influence prices for both farmers and consumers alike.

In other sectors, such as pharmaceuticals, dominant firms like Pfizer, Johnson & Johnson, and Merck have been able to raise prices on essential drugs, even when production costs have not changed significantly. These companies have significant market power, and as concentration has increased, so has their ability to push through price hikes, particularly on brand-name drugs.

The Economic Policy Institute has also pointed out that market concentration contributes to companies’ ability to extract higher profits. In industries with fewer competitors, firms like Amazon in retail or Conagra in food processing can set prices that reflect both their dominance in the market and their ability to raise markups independent of rising input costs.

While it may not be purely a “morality tale,” the idea of “greedflation” does raise moral concerns. Concentrated market power enables firms to set prices beyond what cost increases would justify. This situation often raises questions about fairness, as the drive for profit can overshadow consumer well-being, highlighting a clash between corporate practices and societal values of equity. 

[Lotus-eater]

2 minutes ago, mike carey said:

It's easy to dismiss Whoopi as clueless but doing so assumes that she is sounding off on her theory of life, the universe and everything. Maybe she is, but more likely on any programme like the ones she appears on there are researchers and producers who are setting the topics she raises, to air a bigger story that the network wants to promote (or provoke) discussion of (and appears in this case to have succeeded in doing). So it's potentially naive to dismiss something as just her uninformed opinion.

The role of corporations in setting grocery prices is such an issue as it's part of a wider concern about inflation. It's not a perfect market, so supply and demand are not the only things in play. Retailers, processors and food producers all have a stake in the market (in some cases a single corporation may own producers and processors in the same commodity). The bigger the player the more they can be a price setter, and the closer to a monopoly or an oligopoly there is, the greater control over either the prices they pay for inputs or that they charge for their product. A hypothetical 'Big Egg' would be able to set what it pays farmers, and set what it can charge wholesalers and retailers (a Walmart may be able to force some change but smaller players may not). Does it happen in the egg market? Who knows. And in any other grocery line? Maybe. But does market power allow some corporations to set prices without regard to costs. Of course it can.

Whether it's her own opinion or research supplied to her by interns, they're still clueless.

Your hypothetical about the market power of Big Egg is something that one of my graduate economics professors wrote a book about (Egg Marketing Board: A Case Study of Monopoly and Its Social Costs, which analyzes a monopoly created by government regulation).

But when it comes to the alleged market power of grocery retailers: Where's the beef?

[Lotus-eater]

1 hour ago, ApexNomad said:

The assertion that “there is no clear correlation between market concentration and higher markups” has been widely debated. While it’s true that market concentration doesn’t always guarantee price increases, there is significant evidence suggesting that in certain sectors, concentrated markets can indeed lead to higher prices.

For instance, in the food processing industry, companies like Cargill, Tyson Foods, and General Mills have seen increased control over food commodities such as meat, grains, and packaged goods. Research by economists like Jan De Loecker and Jan Eeckhout shows that when market concentration increases, these companies are often able to raise prices beyond what would be expected due to increases in production costs alone. Their work demonstrates that firms in more concentrated industries have the ability to raise prices through their pricing power, leading to higher markups and profit margins. Cargill, for example, has control over much of the global grain market and can influence prices for both farmers and consumers alike.

In other sectors, such as pharmaceuticals, dominant firms like Pfizer, Johnson & Johnson, and Merck have been able to raise prices on essential drugs, even when production costs have not changed significantly. These companies have significant market power, and as concentration has increased, so has their ability to push through price hikes, particularly on brand-name drugs.

The Economic Policy Institute has also pointed out that market concentration contributes to companies’ ability to extract higher profits. In industries with fewer competitors, firms like Amazon in retail or Conagra in food processing can set prices that reflect both their dominance in the market and their ability to raise markups independent of rising input costs.

While it may not be purely a “morality tale,” the idea of “greedflation” does raise moral concerns. Concentrated market power enables firms to set prices beyond what cost increases would justify. This situation often raises questions about fairness, as the drive for profit can overshadow consumer well-being, highlighting a clash between corporate practices and societal values of equity. 

Yes, it is widely debated (e.g., here and here), so it's not a settled or revealed truth. Even if there is market power, it's not clear that government is capable of improving matters. The pharmaceutical industry is a good example. It's already a highly regulated industry with significant barriers to entry. The likes of EPI may believe that government fine-tuning in the context of various institutional constraints will produce substantially better outcomes even assuming that there's a consensus about what's fair or equitable (which there's not), but I don't.

Edited November 9, 2024 by Lotus-eater

[+ ApexNomad]

32 minutes ago, Lotus-eater said:

Yes, it is widely debated (e.g., here and here), so it's not a settled or revealed truth. Even if there is market power, it's not clear that government is capable of improving matters. The pharmaceutical industry is a good example. It's already a highly regulated industry with significant barriers to entry. The likes of EPI may believe that government fine-tuning in the context of various institutional constraints will produce substantially better outcomes even assuming that there's a consensus about what's fair or equitable (which there's not), but I don't.

I understand your view about the challenges of government intervention, especially in an already heavily regulated industry like pharma. However, just because government action is complex doesn’t make it irrelevant, especially when we consider the broader implications of market concentration.

I’m not as hip or fancy - I don’t know how to do the here and here hyperlink stuff. So, in the meantime, “The Fall of the Labor Share and the Rise of Superstar Firms” (Autor et al., 2019) makes a compelling case that the concentration of market power in certain sectors—such as pharmaceuticals, food processing, and retail—has allowed dominant firms to exert significant pricing power. Even in a regulated environment, companies like Pfizer, J&J, and Cargill can push prices beyond what rising input costs would justify, leveraging their market dominance. This goes beyond simple supply-and-demand economics: concentrated market power means that firms have the leverage to impose higher prices while enjoying record profits, as seen in both the pharmaceutical and food industries.

While it’s true that there’s no one-size-fits-all solution for government intervention, the broader issue is that market concentration enables a form of price-setting that disregards consumer welfare. The EPI and others argue that as fewer firms dominate more industries, the opportunity for price manipulation increases, often at the expense of consumers. That’s why the conversation around “greedflation” and corporate pricing power is so critical. It’s not about eliminating market forces; it’s about ensuring those forces don’t lead to exploitative practices that undermine fairness and competition.

It’s also worth noting that a lack of perfect regulation doesn’t justify unchecked price hikes. When few firms control most of the market, it’s inevitable that they will use that power to push prices higher, regardless of whether the cost structure actually supports it.

[+ sync]

The economists that I'm hearing are telling us that due to a "recent event," we "ain't seen nothin' yet."

[Lotus-eater]

16 hours ago, ApexNomad said:

I understand your view about the challenges of government intervention, especially in an already heavily regulated industry like pharma. However, just because government action is complex doesn’t make it irrelevant, especially when we consider the broader implications of market concentration.

I’m not as hip or fancy - I don’t know how to do the here and here hyperlink stuff. So, in the meantime, “The Fall of the Labor Share and the Rise of Superstar Firms” (Autor et al., 2019) makes a compelling case that the concentration of market power in certain sectors—such as pharmaceuticals, food processing, and retail—has allowed dominant firms to exert significant pricing power. Even in a regulated environment, companies like Pfizer, J&J, and Cargill can push prices beyond what rising input costs would justify, leveraging their market dominance. This goes beyond simple supply-and-demand economics: concentrated market power means that firms have the leverage to impose higher prices while enjoying record profits, as seen in both the pharmaceutical and food industries.

While it’s true that there’s no one-size-fits-all solution for government intervention, the broader issue is that market concentration enables a form of price-setting that disregards consumer welfare. The EPI and others argue that as fewer firms dominate more industries, the opportunity for price manipulation increases, often at the expense of consumers. That’s why the conversation around “greedflation” and corporate pricing power is so critical. It’s not about eliminating market forces; it’s about ensuring those forces don’t lead to exploitative practices that undermine fairness and competition.

It’s also worth noting that a lack of perfect regulation doesn’t justify unchecked price hikes. When few firms control most of the market, it’s inevitable that they will use that power to push prices higher, regardless of whether the cost structure actually supports it.

There is plenty of evidence that there has been no overall increase in market concentration, and where there has been an increase in concentration, it is not necessarily "an indication of the augmented market power of top firms" and is instead mostly technological (more productive firms). "The increasing presence of top firms has decreased local concentration in local markets as the new establishments of top firms gain market share from local incumbents." Further, "we find that total employment rises substantially in industries with rising concentration. This is true even when we look at total employment of the smaller firms in these industries." More local competition and higher employment are the opposite of cartel behavior, which restricts output to increase prices. 

As for government intervention in the market, it requires knowing what the cause of concentration is and exactly what should be done. I am highly skeptical that the common prescriptions of more antitrust enforcement and price controls by bureaucrats will produce more consumer welfare (even assuming that they should override deontological liberty claims).

Edited November 9, 2024 by Lotus-eater

[+ ApexNomad]

59 minutes ago, Lotus-eater said:

There is plenty of evidence that there has been no overall increase in market concentration, and where there has been an increase in concentration, it is not necessarily "an indication of the augmented market power of top firms" and is instead mostly technological (more productive firms). "The increasing presence of top firms has decreased local concentration in local markets as the new establishments of top firms gain market share from local incumbents." Further, "we find that total employment rises substantially in industries with rising concentration. This is true even when we look at total employment of the smaller firms in these industries." More local competition and higher employment are the opposite of cartel behavior, which restricts output to increase prices. 

As for government intervention in the market, it requires knowing what the cause of concentration is and exactly what should be done. I am highly skeptical that the common prescriptions of more antitrust enforcement and price controls by bureaucrats will produce more consumer welfare (even assuming that they should override deontological liberty claims).

While I see the points you’ve made about the potential productivity gains from larger firms, other evidence suggests that increased concentration can indeed translate into augmented market power with significant impacts on prices and consumer welfare.

Firstly, while national concentration data may suggest mixed trends, local market concentration often tells a different story. Research from economists like De Loecker and Eeckhout indicates that rising concentration in certain sectors, particularly those dominated by “superstar” firms, does lead to higher markups, not entirely explained by productivity gains. For instance, in the food processing and pharmaceuticals sectors, dominant players have leveraged their control to raise prices beyond what production costs alone would justify, impacting both consumers and smaller competitors.

Further, while higher employment in sectors with rising concentration might seem encouraging, it doesn’t necessarily reflect competitive conditions. For example, large firms can create local monopolies or oligopolies that force smaller companies out or reduce their ability to set competitive prices. The EPI has argued that concentrated markets often allow dominant firms to engage in price-setting behavior rather than price-taking, which can drive up prices without improving consumer welfare.

As for government intervention, I agree it’s a complex area. But in cases where market power becomes excessive, strategic antitrust action can help restore competition. While blunt price controls might not be ideal, targeted interventions can prevent monopolistic practices, especially in industries with inelastic demand like healthcare or food. Rather than assuming intervention undermines consumer welfare, history has shown that regulatory action, when carefully applied, can enhance fairness and economic stability.

[TonyDown]

What's got my goat with high prices?

Men's deodorant stick.   Some brands offer much higher prices while the packaging contains less weight.  I shop carefully!

[Lotus-eater]

3 hours ago, ApexNomad said:

While I see the points you’ve made about the potential productivity gains from larger firms, other evidence suggests that increased concentration can indeed translate into augmented market power with significant impacts on prices and consumer welfare.

Firstly, while national concentration data may suggest mixed trends, local market concentration often tells a different story. Research from economists like De Loecker and Eeckhout indicates that rising concentration in certain sectors, particularly those dominated by “superstar” firms, does lead to higher markups, not entirely explained by productivity gains. For instance, in the food processing and pharmaceuticals sectors, dominant players have leveraged their control to raise prices beyond what production costs alone would justify, impacting both consumers and smaller competitors.

Further, while higher employment in sectors with rising concentration might seem encouraging, it doesn’t necessarily reflect competitive conditions. For example, large firms can create local monopolies or oligopolies that force smaller companies out or reduce their ability to set competitive prices. The EPI has argued that concentrated markets often allow dominant firms to engage in price-setting behavior rather than price-taking, which can drive up prices without improving consumer welfare.

As for government intervention, I agree it’s a complex area. But in cases where market power becomes excessive, strategic antitrust action can help restore competition. While blunt price controls might not be ideal, targeted interventions can prevent monopolistic practices, especially in industries with inelastic demand like healthcare or food. Rather than assuming intervention undermines consumer welfare, history has shown that regulatory action, when carefully applied, can enhance fairness and economic stability.

1. Contrary evidence: "The rise in markups and market power documented by De Loecker, Eeckhout, and Unger (2020) has recently generated much discussion in economics. We measure the correlation between the change in firm level markups and the change in industry level prices as measured by the Producer Price Index and find little to no relationship both for 1980–2018 and 2018–present."

2. The argument that Walmart, Amazon, etc. force out local firms and eventually raise prices is likewise dubious even if Lina Khan, et al. believe so. 

3. Higher markups do not prove price gouging if, for example, firms anticipate higher marginal costs in the future: "We show that markup growth likely contributed more than 50 percent to inflation in 2021, a substantially higher contribution than during the preceding decade. However, the markup itself is determined by a host of unobservable factors, including changes in demand but also changes in firms’ expectations of future marginal costs. The decline in markups during the first half of 2022—even as inflation remained high—is consistent with firms having raised markups during 2021 in anticipation of future cost pressures. Furthermore, the growth in markups was similar across industries with very different relative demand and inflation rates in 2021, which is also consistent with an aggregate increase in expected future marginal costs."

Also: "Economist Jan De Loecker and his colleagues looked at company-level data on all publicly traded firms to measure both markups and profitability in the United States from 1955 to the present. They have argued that, beginning in 1980, the average “pure profit” rate (that which is in excess of the normal cost of capital) increased from 1 percent to 8 percent. However, this study has been widely criticized, including for its data on markups. Economist Tyler Cowen has pointed out that if profits are defined as the difference between market prices and the marginal cost of production, businesses with high fixed costs and significant economies of scale can have large profits yet still lose money..."

More criticisms of greedflation (specifically Isabella Weber).

4. Fairness is a political concept that is even more disputed, so it is impossible for history to show any such thing. The institutional context in which antitrust bureaucrats operate undermine their supposed virtues. Price controls are even worse as a matter of economic efficiency and deontological liberty.

5. Two different explanations of higher prices in simple form:

Edited November 9, 2024 by Lotus-eater

[+ ApexNomad]

3 hours ago, Lotus-eater said:

1. Contrary evidence: "The rise in markups and market power documented by De Loecker, Eeckhout, and Unger (2020) has recently generated much discussion in economics. We measure the correlation between the change in firm level markups and the change in industry level prices as measured by the Producer Price Index and find little to no relationship both for 1980–2018 and 2018–present."

2. The argument that Walmart, Amazon, etc. force out local firms and eventually raise prices is likewise dubious even if Lina Khan, et al. believe so. 

3. Higher markups do not prove price gouging if, for example, firms anticipate higher marginal costs in the future: "We show that markup growth likely contributed more than 50 percent to inflation in 2021, a substantially higher contribution than during the preceding decade. However, the markup itself is determined by a host of unobservable factors, including changes in demand but also changes in firms’ expectations of future marginal costs. The decline in markups during the first half of 2022—even as inflation remained high—is consistent with firms having raised markups during 2021 in anticipation of future cost pressures. Furthermore, the growth in markups was similar across industries with very different relative demand and inflation rates in 2021, which is also consistent with an aggregate increase in expected future marginal costs."

Also: "Economist Jan De Loecker and his colleagues looked at company-level data on all publicly traded firms to measure both markups and profitability in the United States from 1955 to the present. They have argued that, beginning in 1980, the average “pure profit” rate (that which is in excess of the normal cost of capital) increased from 1 percent to 8 percent. However, this study has been widely criticized, including for its data on markups. Economist Tyler Cowen has pointed out that if profits are defined as the difference between market prices and the marginal cost of production, businesses with high fixed costs and significant economies of scale can have large profits yet still lose money..."

More criticisms of greedflation (specifically Isabella Weber).

4. Fairness is a political concept that is even more disputed, so it is impossible for history to show any such thing. The institutional context in which antitrust bureaucrats operate undermine their supposed virtues. Price controls are even worse as a matter of economic efficiency and deontological liberty.

5. Two different explanations of higher prices in simple form:

Basically, you argue that the rise in markups and market power is not linked to excessive market concentration or anti-competitive behavior, and that factors such as firms’ expectations of future costs explain the increase in prices, while questioning the effectiveness of antitrust interventions and price controls.

Multiple, respected studies, including those by De Loecker, Eeckhout, and Unger (2020), as well as Philippon (2019), show strong correlations between rising markups and increasing market concentration. These studies cover a wide range of industries, particularly sectors like pharma and tech, where market concentration has led directly to higher markups. The evidence suggests that, rather than being driven by future cost expectations, these price increases reflect the diminished competition and market power of dominant firms.

Cowen has critiqued De Loecker’s approach, particularly in how profit and markup definitions can be complicated by industries with high fixed costs and economies of scale. However, the core insight of De Loecker’s study—the dramatic increase in the average “pure profit” rate since 1980—remains a valuable contribution to understanding market dynamics. De Loecker’s study shows that the overall trend of rising markups, even after adjusting for fixed costs, highlights a shift in market power toward larger firms, particularly in industries with less competition. This has been corroborated by other influential economists, such as Philippon, who also links rising markups with increased market concentration and lower levels of competition.

Furthermore, while criticisms of the methodology are common in economic studies, the consistent findings across multiple independent studies, including those supported by the IMF, suggest that this rise in markups reflects more than just industry-specific quirks. It indicates a broader structural shift where dominant firms are able to exert more market power, not just profit from economies of scale, but also from reduced competition and barriers to entry. To dismiss these findings entirely would be to overlook how the data fits within a larger context of increasing market concentration across various sectors.

To claim that history cannot demonstrate the positive outcomes of antitrust measures because fairness is politically disputed is simply incorrect. Antitrust actions—like the breakup of Standard Oil in 1911—resulted in increased competition, lower prices, and a more balanced market. These are not hypothetical outcomes; they are well-documented historical facts. The institutional context in which antitrust bureaucrats operate may be imperfect, but that does not negate the fact that antitrust measures have historically restored fair competition and benefited consumers. Furthermore, price controls, when applied strategically in sectors like healthcare or utilities, have proven effective in protecting consumers from monopolistic pricing. Fairness disputes should not overshadow the tangible benefits of these measures. If we dismissed all interventions simply because fairness is disputed, we would be ignoring the clear lessons of history on how to maintain competitive, just economic environments.

[samhexum]

On 11/9/2024 at 4:13 PM, TonyDown said:

Men's deodorant stick.   Some brands offer much higher prices while the packaging contains less weight. 

THAT STINKS!

[viewing ownly]

It was reported that last week, the price of groceries decreased for the first time since the second week of January of 2020. It's more than clear as day of the next-level evils in charge who purport this politically partisan price adjusting - gasoline prices dropped significantly last week as well. There will be no accountability for their 22% cost increase that in turn financially hurt the American consumers this decade. 

[samhexum]

And the little guy got screwed again; what else is new?

At least I have the time and desperation to scour the circulars every week and can often keep my costs down by making cost-effective purchases.

And if there is a limit of how many of an item you can buy I just use my sister's father in law's account.  He died three days after Biden was elected but he still regularly buys Coke Zero, rye bread, and lower-sodium ham. He really should try to diversify his diet.

 

Edited November 19, 2024 by samhexum
Because it's 1:30 AM and I have nothing better to do.

[samhexum]

8 PM, July 4th is the perfect time to go shopping… Nobody in the store. 

Except that they jack up the prices for the holiday...

Eight 2L bottles of Coke Zero...

Balance due… $102.64.
 
The cashier had a wee bit of trouble with the rain check process.