> While this obviously contributed to rising prices, the report finds that company profits increased at a much faster rate than costs did, in a process often dubbed “greedflation.”<p>I think there is this expectation that companies "should" only raise prices necessary to cover their cost increases. But companies charge what the market can bear and, depending on the specific circumstances, this could be equal to, less than, or more than the cost increases.<p>To use a HN-friendly example, let's say AWS cuts their EC2 costs. If you're providing an undifferentiated computation service using EC2, you'll likely have to cut your costs or you will lose all your business to your competitors. If you're providing a highly differentiated SaaS product, you can probably keep the cost savings to yourself.<p>You can reason in the opposite direction for price hikes. Depending on the exact company in question, they could be in a privileged position of the supply chain or have marketing power that allows them to increase prices even more.<p>One main difference here is price stickiness [1], i.e. prices tend to be fixed for a period of time, even if the underlying economics has changed. I think this is underlying reason for perceptions of "greedflation" because, during period of inflation, prices become less sticky and companies use this to adjust prices to better match the underlying economics.<p>[1] <a href="https://en.wikipedia.org/wiki/Nominal_rigidity" rel="nofollow noreferrer">https://en.wikipedia.org/wiki/Nominal_rigidity</a>