Do you really believe that businesses priced their products low until the business press started reporting on inflation and then realized “oh man, I should raise my prices!”?
Did the (apparent) sudden flourishing of gen-AI from a bunch of different companies come about because the press started reporting on gen-AI? Or do the press start writing about the early part of the wave?
Absolutely yes. They had an excuse they thought their customers would swallow, and saw other companies doing it.
My view is: A. Injecting as much money into the economy as we did was bound to reduce the value of an individual dollar. B. Sellers would naturally demand more of those less valuable dollars for their goods and services. C. The press then reports on the first signs of that wave landing. D. The rest of the wave then lands.
Starting at step C, it looks like the reporting caused inflation. I think that’s a “wet streets cause rain” analysis of the situation.
It’s quite possible that the injection was the least bad thing given the real and perceived constraints of the day. But the inevitable consequence was the devaluing of the dollar.
Yes, inflation matters a lot, but the psychological part is significant as well (and is conveniently overlooked in basic classical undergrad economics).
A similar thing happened when the Euro was introduced in Europe in 2002: The act of changing the price tags, the confusion of consumers when showing different numbers was an opportunity to hike prices.
To the extent that you use the profits from selling widgets as the means to buy groceries to feed your family, yes, you have to, unless your family wants to go on a diet.
But…what if they’ve been reading in the news about how inflation is through the roof and the price of everything is going up? Now they’re psychologically primed for an increase and we can raise prices higher with less concern about the blowback. Make hay while the sun shines.
That said, inflation does create an environment where businesses can "reset prices" for reasons other than inflation driving up costs. But that's inflation in general - it creates an environment of rising wages, rising costs and a vicious circle where price increases in one place, drive price in other places. It's one reason why inflation is so hard to break. When expectations are that "prices are going up faster" then people's behavior changes.
Do you really think a believable excuse people will swallow doesn't make a difference in what companies can get away with? (Especially one that's global?)
See, for example, daily housekeeping in hotels. Hotels were trying to do away with this pre-COVID, without much success; people correctly saw it as a measure to boost profits at customers' expense.
People accepted "oh it's COVID" as an explanation, so they got away with it, and it's not going to come back.