Thread by @HalSinger

Now that profits (and not wages) have been established as the key driver of inflation, it might be worth thinking of more subtle, non-price, ways in which firms are exploiting “supply disruptions” and “labor shortages” to exercise power over consumers. THREAD

Others have noted that companies are can achieve higher effective prices by reducing the quantity in the package. Another form of #HiddenInflation could take the form of cutting back on services, reducing the quality of the product, and increasing the quality-adjusted price.

Here’s an example travelers know too well: Hotels have cut room cleaning since the pandemic. But hotel rates have continued to skyrocket. On a quality-adjusted basis, inflation in hotel services is even higher than the price-based inflation numbers suggest.

Servicing, support, or repairing a durable good is expensive. It would make sense that firms would always prefer to skimp on these offerings, so long as they can protect their reputations. But the pandemic potentially gave them license to skimp on support even more.

This is purely anecdotal, but on Friday I had three firms basically leave me in the lurch over malfunctioning equipment—brakes on a car, a piece of exercise equipment, and a cooling unit. The service station had my car since Monday, but still hadn’t called me by Friday.

It was as if they could care less that I couldn’t use their products. Consumers are already vulnerable for aftermarket support services, as undoing the transaction in the primary market is difficult if not impossible.

But I suspect that “supply shortages” and consumers’ willingness to accommodate such “dislocations” have given firms license to cut support even more than usual. I’m curious if I just had a bad day, or whether cutting corners this way is endemic in the economy.

Measuring support services seems daunting. But perhaps one could measure the number of complaints to the FTC or the Better Business Bureau to learn if consumers are feeling the shaft at a heightened level that coincides with inflation (a price-based form of shafting consumers).