Did QE Cause Inflation?

[904VT]

Originally Posted by Wcdhtwn

Absolutely untrue. There are many different pricing strategies to go along with the many number of business strategies. Some businesses will price to increase volumes of sales, that isn’t profit maximizing. Some companies want to have a certain position in the market, not the most expensive nor the least, or maybe they want to be the least. These aren’t pricing to maximize profit. Some companies price very aggressively to put pressure on competitors, also not profit maximizing. These are not uncommon examples, thousands of companies undertake these pricing strategies daily and there are countless more.

No product would ever go on sale, no company would ever offer promotions, if the sole objective was to maximize profit.

A discussion about short-term profit maximization vs long-term profit maximization would add context. What you describe may increase long-term profitability vs shorter-term. In some cases companies will take hits on shorter term profit i.e not price at marginal cost = marginal revenue, because it will give them other value. In this case that could be increase in intangible value and/or greater long term margin maximization by squeezing competitors. Both increase potentially shareholder value and determined based on maturity of the industry.

You guys are both correct but talking two sides of the same coin.