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PaperclipPerfector  3mo ago (text post)   30108 thread views

Culture War Roundup for the week of August 12, 2024

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Because consumers hate it when prices increase. When inflation hits, grocery stores prefer to raise their prices in one big jump rather than many small jumps - or so I've been told. The idea is that if you increase prices by X 5 times the consumers will register 5 separate increases, but if you raise it by 5X then they'll only register one increase. Because of that, grocery stores (and stores in general) will increase their prices ahead of expected inflation to avoid having to continue to make small price increases over time.

The logic is essentially that stores are currently priced according to next year's inflation. When inflation is low that's no big deal, but when it's high it can be a pretty penny. Continuing that logic, they could be forced to match current inflation rather than preemptively raising prices for future inflation. This would shave a small but meaningful amount off prices.

What's the optimal way to determine price of any good, in your opinion?

Optimal for what purpose? In order to optimize you must first have a goal.

This is not consonant with the behavior of grocery prices. They are, in fact, extremely volatile. And the consumer price index for food at home certainly does not lead the producer price index for supermarkets by a year.

Because of that, grocery stores (and stores in general) will increase their prices ahead of expected inflation to avoid having to continue to make small price increases over time.

So why are their margins so shit?

they could be forced to match current inflation rather than preemptively raising prices for future inflation.

How?

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