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.

RELATED TERMS
  1. Deflation

    A general decline in prices, often caused by a reduction in the ...
  2. GDP Price Deflator

    An economic metric that accounts for inflation by converting ...
  3. Shadow

    A small line found on a candle in a candlestick chart that is ...
  4. Debt Deflation

    A situation in which the collateral used to secure a loan (or ...
  5. Services Sector ETF

    Exchange-traded funds (ETFs) that invest in either the consumer ...
  6. Shadow Pricing

    1. The actual market value of one share of a money market fund. ...
Related Articles
  1. Insights

    What's The Difference Between Inflation And Deflation?

    Inflation occurs when the prices of goods and services rise. Deflation occurs when prices decrease.
  2. Insights

    What is Deflation?

    Deflation is an economic term used to describe a period of declining prices for goods and services. Decreases in the money supply, government spending, consumer demand and business investment ...
  3. Insights

    Do Deflationary Shocks Help Or Hurt The Economy?

    Find out how deflationary shocks can both benefit and hurt consumers and businesses.
  4. Insights

    Can Deflation Be Good?

    General economic theory consensus rules that deflation is bad for the economy. But the Swiss economy, which is growing despite a drop in prices for the last four years, is proving otherwise. ...
  5. Insights

    What Does Price Level Mean?

    Price level is the average of all current prices for goods and services in an economy.
  6. Investing

    Protect Your Portfolio Against Inflation And Deflation

    Inflation and deflation are opposite sides of the same coin. When both are threatening, here's what to do to keep your portfolio safe.
  7. Investing

    The Upside Of Deflation

    Deflation has continued to pop up throughout economic history - but is that such a bad thing?
  8. Insights

    Why is Deflation Bad for the Economy?

    Deflation can adversely affect the economy in significant ways.
  9. Insights

    Why Deflation Is The Fed's Worst Nightmare

    The measures taken by central banks seem to be winning the battle against deflation, but it is too early to tell if they have won the war.
  10. Investing

    Will European Deflation Lead to More Stimulus?

    Discover why the European Central Bank is likely to announce a bolder stimulus package after consumer prices declined 0.2% in February 2016.
RELATED FAQS
  1. Are there any economic arguments in favor of deflation?

    Learn about the arguments in favor of deflation and why some people feel it is a good thing despite being almost universally ... Read Answer >>
  2. What can cause price deflation?

    Learn what price deflation is, how inflation rates can be calculated using the consumer price index and what some causes ... Read Answer >>
  3. What does deflation mean to investors?

    Before we delve right into the topic of deflation, it should be noted that the causes and effects of deflation are complex ... Read Answer >>
  4. What is the difference between inflation and deflation?

    Determine how inflation and deflation affect prices and employment. Economies frequently teeter between these two economic ... Read Answer >>
  5. What impact would deflation have on the national debt?

    Learn what deflation is, common problems of deflation and the impact that deflation can have on an economy and a country's ... Read Answer >>
  6. How does deflation impact consumers?

    Learn about how deflation affects consumers; they thrive in the short term, but in the long term, deflation can be disastrous ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center