If you’ve walked into a grocery store lately and wondered why a head of lettuce still costs what it did at the height of the 2022-2023 supply chain crisis, you’re not alone. As we move through early 2026, a frustrating economic pattern has emerged: “sticky” inflation.

Despite supply chains normalizing, the prices established during the pandemic era haven’t reverted. The reason isn’t just about the “devaluation of money”—it’s about a structural shift in who owns our markets.

The Great Consolidation

The COVID-19 lockdowns were more than a health crisis; they were an “extinction-level event” for small businesses. Small firms often lack the liquidity to survive prolonged disruptions. Data shows that business exit rates during the pandemic were nearly twice as high as historical norms, especially in retail and food services.

When these small competitors vanished, they left behind a vacuum. Large conglomerates and oligopolies—markets dominated by just a few firms—stepped in to fill the void. This led to a massive spike in market concentration that remains high today in 2026.

Why Oligopolies Keep Prices High

In a competitive market, firms lower prices to win customers. In an oligopoly, the incentive is the opposite. Firms are highly interdependent; if one cuts prices, others must follow, leading to a “price war” that destroys everyone’s profit margins. Instead, these dominant actors prefer “non-price competition” (like advertising) while keeping price levels stable and high.

This is why we see “downward stickiness” in prices. Even when the cost of imported inputs or shipping falls, large firms often choose to absorb the difference as profit rather than passing savings to you.

Oligopolies can contribute to higher prices in specific markets and potentially exacerbate overall inflation, primarily because they possess market power and reduced competition allows them to reduce consumer surplus, rather than because they don’t produce any consumer surplus at all. 

Explanation

• Market Power and Pricing: An oligopoly is a market dominated by a few large firms. This limited competition allows firms to set prices higher than in a perfectly competitive market, closer to monopoly levels, by potentially restricting output. This market power, especially if firms collude (form a cartel) or engage in tacit coordination (such as price leadership), leads to increased prices and profits.
• Reduced Consumer Surplus: Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. In an oligopoly, the higher prices and lower output mean that this difference is smaller, effectively transferring wealth from consumers to producers. While some consumer surplus still exists, it is significantly reduced compared to a competitive market.
• Impact on Inflation:
  • Price Levels vs. Inflation Rate: Oligopolies lead to higher price levels (prices are consistently high relative to costs). Inflation, however, is the rate of change of prices over time. A one-off price increase due to market power doesn’t cause persistent inflation on its own.
  • Exacerbating Inflationary Pressures: Oligopolies can, however, contribute to general inflation in certain situations:
    • Cost Shock Pass-Through: Firms with market power in concentrated industries can pass on cost increases to consumers more easily and absorb them into increased markups, which can accelerate and exacerbate an inflationary process triggered by external shocks (e.g., supply chain issues, energy price spikes).
    • Struggle for Income Share: The behavior of oligopolistic groups struggling for a share of income can lead to price oscillations and contribute to chronic inflation, particularly in economies with pre-existing inflationary inertia.
    • Lack of Innovation Incentive: In some cases, the lack of competitive pressure may reduce the incentive to innovate or achieve efficiencies, which could otherwise help to keep costs and prices down over the long term. 

In summary, the reduced consumer surplus is a consequence of the higher prices oligopolies can charge due to their market power. This market power allows them to contribute to, and potentially worsen, overall inflationary dynamics, especially during supply shocks, rather than being the sole, direct cause of inflation through the mechanism of “not producing consumer surplus”.

The Rise of “Greedflation”

By 2026, economists have a name for this: Greedflation. While corporate profits typically account for about 11-15% of price growth, recent studies show they contributed to over 50% of inflation in the post-pandemic era. In 2024 and 2025, profit margins in highly concentrated sectors like energy and banking reached record highs, far exceeding their pre-pandemic levels.

Why are the prices so high?

In 2026, economists have observed that the market consolidation following the COVID-19 pandemic has created structural shifts that contribute to “sticky” inflation rather than just a temporary devaluation of money.

Market Consolidation and Price “Stickiness”

• Permanent Price Levels: Oligopolies often lead to higher permanent price levels because they have the market power to set prices rather than take them from the market. While inflation is technically the rate of change, a shift from many small competitors to a few large ones often results in a one-time “step up” in prices that never reverts to previous levels.
• Reduced Incentive to Lower Prices: In an oligopoly, firms are interdependent. If one firm cuts prices, others must follow, leading to a “price war” that hurts everyone’s profits. Consequently, firms prefer to compete on non-price factors like advertising, which keeps prices high and stable even when costs might otherwise allow for decreases. 

The Impact of COVID-19 Lockdowns

• Extinction-Level Event for Small Business: Data through 2026 confirms that the 2020 lockdowns acted as an “extinction-level event” for small, thinly capitalized firms. In California alone, market concentration (measured by the Herfindahl–Hirschman Index) spiked by over 21% between 2019 and 2021 as small businesses closed permanently.
• Conglomeration and Profit Margins: Large firms used the pandemic to acquire distressed competitors, leading to an “acquisitive frenzy” fueled by low interest rates. In sectors like grocery retail, this has allowed dominant players to triple their profit margins since 2020 through “greedflation,” where they raise prices beyond what is justified by input costs. 

Barriers to Entry and Market Recovery

• Harder for New Actors: As markets become more concentrated, the “moat” around existing firms grows. High startup costs, economies of scale, and established brand loyalty make it increasingly difficult for new competitors to enter and drive prices back down.
• The “Stickiness” of 2026: As of early 2026, global inflation remains “sticky” around 3%, with little sign of returning to pre-pandemic targets. This persistence is partially attributed to dominant firms’ ability to pass through cost shocks (like 2026’s new tariff pressures) more easily than smaller firms could. 

In essence, unless regulatory action “breaks down” these oligopolies or significantly lowers the barriers for new entrants, the higher price levels established during the post-lockdown consolidation are likely to remain a permanent feature of the economy.

Solution:Ensure market competition

In 2026, economists use the benchmark of Perfect Competition to highlight why today’s oligopolistic markets are inefficient and contribute to higher living costs. 

Comparison: How Markets “Should” Be vs. How They Are

Feature	Perfect Competition (Ideal)	Oligopoly (Current Reality)
Price Level	Prices equal the lowest possible production cost.	Prices are set at a significant markup by a few firms.
Consumer Surplus	Maximized; consumers get the most value for their money.	Reduced; value is transferred from consumers to corporate profits.
Market Entry	Easy for new actors to enter and drive down prices.	Extremely high barriers (high costs, regulation, control of supplies).
Efficiency	Highly efficient; no resource wastage.	Less efficient; resources are often wasted on advertising or “non-price” competition.

In an ideal market, no single firm has the power to raise prices without losing all their customers to a cheaper rival. Today, because so few firms control essential goods, they can keep prices high even when their own costs drop. 

How the US Has Mitigated This Historically

The US has a long history of “trust-busting” to break up concentrated power: 

• The Sherman Antitrust Act (1890): The first federal law against monopolies. It was used to dismantle industrial titans that crushed competition during the Gilded Age.
• Breaking Up “Ma Bell” (1982): Perhaps the most famous example of breaking an oligopoly was the court-ordered breakup of AT&T into seven “Baby Bells,” which introduced competition and eventually lowered costs for telecommunications.
• The Clayton Act (1914): This strengthened the government’s ability to block mergers before they could create an oligopoly.
• 2025–2026 Actions:
  • Food Supply Investigation: In December 2025, the US President issued an Executive Order directing the DOJ and FTC to investigate whether anti-competitive behavior in the food supply chain (meat processing, seed, fertilizer) is artificially keeping food prices high in 2026.
  • Divestiture Remedies: Regulators in 2025 and 2026 are increasingly requiring companies to sell off (divest) parts of their business as a condition for mergers to prevent too much market concentration.
  • State-Level Action: Since 2025, several states have created dedicated antitrust divisions to investigate “surveillance pricing,” where retailers use data to hike prices for specific customers.