Rushing to your gate at Chicago’s O’Hare International Airport, you might just glimpse a book for sale at a bookstore. its title? “How to raise prices.”
It should be a bestseller. Anyone eating out is shocked to get stuck on a $13 quick lunch or main meal at a neighborhood bistro that was just $21 a few months ago and is now $29.
Why does this happen? You’ve probably read about the obvious reasons many times. Inflation is still rising. Wage bills are rising thanks to government measures. health care costs. Unresolved supply chain issues.
But there’s another reason that gets less attention: Businesses raise prices because they can. Simply put, they can do so now with relative impunity.
One fast food franchise owner recently told us that he has raised his menu prices four times in the past year alone. Certainly, this is partly in response to increased costs, especially labor. But he also said, because everyone else is raising prices, so consumer resistance is greatly reduced. If people expect to pay more, they are more likely to pay more.
The owner does not know how long this situation will continue. Until prices go up, while they can.
When the dawn of online shopping came, it was widely assumed by retail economists that there would be increased price transparency in the future.
If consumers could compare prices at every store in the world on their computers, the thinking went, there would be a shift toward what economists call perfect competition. The market will have fewer barriers and consumers can easily find the best deal. Only the fittest retailers will survive.
But that is not what happened. Retailers are becoming more adept at hiding prices, both through airline-style cannibalization; Requires a monthly fee or memberships to qualify; promotion of private labels; Or use social media data to squeeze the most juice out of consumers.
Instead of having a golden age of price transparency, we are now in a situation where it is almost impossible to compare apples to apples.
Add a lot of media attention to how fast prices are going up, and fast! It becomes easier to raise prices.
Ironically, this may seem to be one of the main causes of persistent inflation.
If you don’t know how much you are really paying, then the price resistance will be reduced. We see it everywhere.
Mercy ask the beleaguered poor consumer.
– Chicago Tribune