Shrinkflation

[6] Shrinkflation allows manufacturers and retailers to manage rising production costs while maintaining sales volume, operating margin, and profitability, and is often used as an alternative to raising prices in line with inflation.

Without explicitly using the term shrinkflation, macroeconomist Vivek Moorthy much earlier documented and analysed the shrinkage effect of inflation, explaining it by Arthur Okun’s "invisible handshake" approach: "Prices are ... based on notions of trust and fairness.

Hence, to cope with inflation, fast moving consumer goods firms would often resort to shrinking the product size to avoid raising prices.

"[11] Consumer advocates are critical of shrinkflation because it has the effect of reducing product value by "stealth".

[12] The reduction in pack size is sufficiently small as not to be immediately obvious to regular consumers.

According to Ratula Chakraborty, a professor of business management, they should be legally obliged to notify shoppers when pack sizes have been reduced.

[18] Discovered by Ernst Heinrich Weber, the JND is a fixed proportion of the reference sensory level, and so the ratio of the JND/reference is roughly constant:

"[19] In the United States, the Bureau of Labor Statistics has written that "the impact of product downsizing at the all commodity and services level is minimal, with an average annual effect of 0.01 percent per year, so while consumers may notice shrinkflation at the grocery store, it has a very small impact the overall inflation picture they face.

In October 2021, NPR's Greg Rosalsky from Planet Money proposed the term skimpflation to refer to a degradation in the quality of services while keeping the price constant, such as a hotel offering a more meager breakfast or reducing the frequency of housekeeping.

[6] Conversely, in September 2022, Izabella Kaminska's The Blind Spot published an article that proposed the term shitflation in reference to maintaining a product's price while decreasing quality.

The article's author, Dario Garcia Giner, proposed that shrinkflation and shitflation spoke to the Grossman-Stiglitz paradox, and argued they were akin to "Trojan horses buried in the heart of mainstream finance — just waiting to tear down the system by discombobulating relative values in the big-data spreadsheets that central bankers and financiers depend on to manage economic allocation."

[39] Biden's claim has been criticized, with some conservatives arguing that his economic policies and the Inflation Reduction Act were the primary cause of price increases and shrinking products.