Just read an interesting research paper from the Roosevelt Institute regarding causes for markups during the Pandemic:
https://rooseveltinstitute.org/wp-content/uploads/2022/06/RI_PricesProfitsPower_202206.pdf
Prices, Profits, and Power: An Analysis of 2021 Firm-Level Power
“Policy Implications
While the idea that we are facing the threat of a wage-price spiral is becoming conventional wisdom, this brief and other research finds that changes to labor and worker compensation are not driving factors in recent markups. Indeed, workers are not the only economic agents that affect business pricing decisions. If recent research on shareholder primacy is any indication, capital plays a much bigger role than labor in C-suite decision-making calculus (Palladino 2019; Kinder, Bach, and Stateler 2022). Financial analysts, asset managers, activist investors, and a broader group of shareholders arguably have a strong role in setting incentives toward upward pricing pressures—a phenomenon that could be described as a price-profit spiral. In this account, the decision-makers in publicly traded firms are sensitive to shareholder pressure to consistently meet short-term earnings expectations and to distribute large proportions of these earnings in share repurchases and dividends. In an inflationary environment, firms that enjoy the discretion and power to adjust markups are more attractive to financial analysts and asset managers (“Pricing Power Is Highly Prized on Wall Street” 2021; Alloway 2022). If indeed companies’ pricing strategies are responsive to these sorts of short-term capital market pressures, the policymaker playbook to curbing inflation will have to expand.
Even though these results may be specific to the inflation we’ve seen in 2021, markups being unusually and suddenly high means there is room for them to reverse with little economic harm and with likely societal benefit, including lower prices in the short term and less inequality and potentially more innovation in the medium term. We believe the evidence we have presented strengthens arguments for an all-of-government administrative, regulatory, and legislative approach to tackling inflation, which should include demand, supply, and market power interventions…”