Craig Duddy, in his essay “Cracked Shells: Why Egg Prices Are High” (May 2, 2025), explains how prices rise when supply is constrained. This has occurred recently in the case of eggs as flocks of laying hens have been culled in order to curtail the spread of a deadly bird virus.
Duddy correctly attributes egg price increases to a combination of reduced egg supply and low price elasticity of demand for eggs about -0.15 percent (meaning that for every 1 percent increase in egg prices, consumers buy 0.15 percent fewer eggs). Such low price elasticity of demand is predictable because eggs are a product with few substitutes, and are considered a household food staple.
From his analysis, Duddy concludes that sharply increasing egg prices are due to the forces of supply and demand rather than monopolistic price-fixing collusion among egg producers, and that no FTC investigation is required as some have suggested. As his conclusion states, “...rising egg prices are a supply problem, which the market is effectively solving, and not a problem of monopoly power.”
But what if something else were going on in the egg-production industry? What if, for example, this small industry, with few firms, were, in fact, attempting to maximize total revenue from egg sales? Or what if recent industry total revenue and profits are not intentional but have in any case occurred? Economic theory can easily be extended to investigate such results.
This phenomenon occurs when OPEC, for example, lowers oil production. With relatively inelastic demand for oil, lower production by cartel countries increases total oil revenue. Oil production costs are insignificant because oil is just lying below the surface waiting to be pumped in countries like Saudi Arabia, which geologists tell us has endless supplies of the stuff.
OPEC focuses on total revenue—not on world prices per barrel—when determining its drilling/supply intents. These revenues are important in providing social services offered to OPEC countries’ populations, and serve as a major source of government stability.
While no one is accusing egg producers of colluding or price-fixing, from an economic standpoint, it certainly could be happening either by design or incidentally.
