While companies set prices, they don't set the market price. Here's a crude microeconomic explanation for you: When a market is in equilibrium, suppliers are s

While companies set prices, they don't set the market price. Here's a crude microeconomic explanation for you: When a market is in equilibrium, suppliers are selling enough of a product to satisfy demand. The product's price is a result of the market's supply and demand functions, and in equilibrium these two functions intersect. Easy so far. Let's assume, for simplicity, that our market is perfectly competitive. If a firm tries to increase prices, we'll shift left along the demand curve; since all demand curves slope downward[1], a higher price means less demand. So companies are charging more, but they're selling less product. This is bad for both parties: consumers don't like higher prices, but companies don't like unsold units either. Basically: companies can't just raise prices forever. They'll meet consumer resistance. Also, this article is really off-topic for HN. [1] Hotly-contested issue in economics. There are some rare occasions where demand curves slope upward (i.e. consumers buy more of something if it's more expensive). These are called "luxury goods." Think of designer handbags.