Comment: Shrink inflation is not the enemy – in this economy, the alternative could be worse

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David Jones is a policy analyst and economist. He is a fellow at the Canadian Center for Health Economics, a Telus Research Fellow and studies public policy at the University of Toronto’s Munk School of Global Affairs & Public Policy.

Canada’s biggest grocer is now in the naughty seat as shoppers vent their anger over rising food prices. But there’s one effect of the pandemic and inflation that shoppers can’t get their feet on: shrinkage.

Unlike many portmanteaus, abstract inflation is not a source of entertainment. It is used to describe a decrease in the quantity of a good without decreasing its price. In some cases, grocery items also shrink in size is increasing At a price – double the volume for the pocket book.

When basic necessities take up a large portion of the household budget while families struggle with other living expenses, it’s no wonder consumers are reeling.

Compression inflation is not a new entity strategy. Ultimately, when firms’ input costs rise – they I’ve done it In recent years – this cost pressure has to be channeled somewhere. Apart from cuts in dividends or executive pay packages, this leaves a company with two options: shrink inflation or higher prices.

While we may actually like contractionary inflation, some research shows that we are reacting Less negative To shrink rather than overprice. For example, a Experiment A variety of fully transparent pricing and measurement strategies were tested in Australia and price increases were found to be the preferred option by shoppers.

Compression inflation is not always the optimal approach. Treats such as ice cream can begin to be taxed when they are reduced to being treated as single servings. This is another way for consumers to feel the double whammy of a smaller size and higher price. Compression inflation increases the waste produced by packaging, which is detrimental to efforts to mitigate climate change.

But, surprisingly, contractionary inflation has some advantages. For one, it carries the lowest value part of the product. Imagine eating a bag of Oreos. The first ones are exciting, but the extra cookie at the end of the pack gives less extra satisfaction. In economic parlance, this is called diminishing returns.

From a psychological perspective, you’ll feel better about losing those end-of-pocket Oreos versus paying more to keep them. (You might feel better eating fewer Oreos, but that’s another story.)

As frustrated as we may be with shrinking inflation, the real source of our outrage is „Secret blowing,” whereby companies indirectly undercut their products. For example, we buy a familiar cereal box, only to discover that its contents resemble an airbag. This is borderline insulting.

There are plenty of examples online. Toothpaste Tubes now come in ludicrously oversized packages to hide the reduced production volume inside. In England, A the box Teabags went from 240 to 210 bags with a subtle change of wording on the packaging from „50% more bags” (for 160-unit-packages) to „50 extra bags”. You almost have to admire the brilliance.

But it doesn’t have to be this way. For example, Tillamook Ice Cream – an American company – chose to make it clear to its customers that it was reducing its production due to rising costs.

As consumers we also have to take some responsibility. Recent U.S Census, 75 percent of people noticed compression inflation, and nearly 50 percent said they would buy a different brand as a result. Consumers don’t need to feel helpless.

Compression inflation may now be the „least bad” option. I ask one thing: Mr. If Pringle is going to cut back on his delicious chips, he should at least have the decency to look me in the eye and say it to my face.