Did Market Power Drive Inflation in 2021-2023? Sellers' Inflation, Markups, Bernanke-Blanchard, Menu Costs and Capacity Limits

Deep End Era. Engineering with Sankalp · Oct 29, 2026 · 1h 10m

Corporate profits as a share of gross domestic product hit post-war highs in 2021 and 2022 just as consumer price inflation surged past nine percent in the United States and ten percent in the Eurozone. Did corporate market power drive that inflation, or were high profits the competitive symptom of fiscal stimulus slamming into vertical supply bottlenecks? We build the theory and empirical evidence from first principles: Lerner markups, Weber-Wasner sellers' inflation, forward-looking sticky-price markups, short-run capacity rents versus monopoly rents, Bernanke-Blanchard's macro…