Value Deflation

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DEFINITION of 'Value Deflation'

When companies cut their costs without increasing prices for consumers. Value deflation occurs when retailers and service providers give out smaller portions, fewer services and generally provide less for the same price.

This is also referred to as "shadow inflation."

BREAKING DOWN 'Value Deflation'

Examples of value deflation include reductions in the amount of food in a typical package such as a juice box or bag of potato chips, reduced portion sizes at restaurants, and curtailed cleaning and concierge services at hotels. Of course, all of these businesses continue to charge the same price despite the reduction in products or services. This method is an alternative to raising prices that the consumer is less likely to notice.

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