Sellers’ Inflation, Profits, and Conflict: Why Can Large Firms Hike Prices in an Emergency? — Isabella M. Weber and Evan Wasner, 2023
This paper argues that much of post-COVID inflation was driven not simply by excess demand or wages, but by large firms using supply shocks and bottlenecks to raise prices and protect or expand profits. The authors describe this as “sellers’ inflation,” where corporate pricing power becomes a major driver of rising prices.
1. Post-COVID inflation was heavily shaped by firms with market power raising prices during sector-wide shocks
2. Inflation spread through the economy as shocks moved across supply chains and strengthened corporate pricing power
3. Public narratives and financial markets reinforced corporate price hikes
4. Pandemic inflation temporarily shifted income from workers toward capital owners
5. Inflation policy should target bottlenecks, price spikes, and concentrated market power directly
⭐ Most Impactful Star Facts
- The paper argues inflation after COVID was driven not only by consumer demand or wages, but by corporations with pricing power raising prices during shortages.
- PepsiCo executives described the pandemic as creating a “rational pricing environment” where companies could raise prices together without major backlash.
- U.S. nonfinancial corporate profit margins hit about 13.5% in 2021, surpassing previous postwar records during the inflation surge.
- The paper argues wages often rose after inflation began, challenging the idea that workers’ paychecks were the primary cause of inflation.
- Media narratives about shortages and inflation helped normalize higher prices, making consumers more accepting of corporate price hikes.
- The authors argue inflation temporarily shifted income upward from wage earners toward corporations and asset owners because prices rose faster than wages.
🧠 Conclusion
The paper’s most revealing insight is that inflation was not simply a natural economic event caused by workers spending too much or wages rising too fast.
It argues that large corporations used shortages, supply shocks, and public expectations to raise prices and protect profits during the pandemic.
The surprising takeaway is that inflation can redistribute wealth upward, meaning crises do not affect everyone equally—they can strengthen the economic power of firms already positioned to dominate markets. ⭐