Hidden price increases, product downsizing, and shrinkflation: a post-Keynesian macroeconomic perspective.

This article examines the industrial practice of product downsizing—also known as "shrinkflation" or hidden price increases—where firms marginally reduce the size, weight, or input quality of goods or services without proportionally lowering prices. It situates this practice as a competitive microeconomic strategy with significant macroeconomic implications, including effects on income distribution, consumer welfare, prices, profit margins, and employment. Using a post-Keynesian stock-flow consistent macroeconomic model, the study finds that while product downsizing leads to lower prices and slightly higher employment and growth rates, it reduces consumers’ "value for money" as product quantity or quality declines more than prices fall, ultimately benefiting firms through increased profit margins. The article highlights the need for further research on the broader economic and environmental impacts of this widespread but underexplored corporate strategy.