selfinflation

Selfinflation is a term sometimes used in discussions of behavioral economics and market dynamics to describe a self-reinforcing inflationary process driven by the beliefs and actions of market participants about their own value, demand, or prices. It is not a formal monetary phenomenon, but rather a behavioral or reputational one in which expectations about value feed actual price or valuation increases.

Origins and scope: The concept appears in analyses of consumer psychology, branding, and asset markets where individuals or firms attempt to signal status, quality, or future demand. Selfinflation can occur when optimistic self-assessment leads to higher stated valuations, prices, or compensation, prompting others to respond in ways that validate the inflated claims. Media coverage and social amplification can further entrench these dynamics, creating a feedback loop that sustains or accelerates price growth.

Mechanisms: Key mechanisms include self-reinforcing expectations, overconfidence, and selective signaling. When actors believe that prices or valuations will rise, they adjust behavior accordingly—raising asking prices, elevating negotiations, or increasing perceived value—which in turn influences others to react similarly. This can produce price spikes, mispricing, or bubbles even if underlying fundamentals have not changed.

Contexts and effects: Selfinflation can manifest in consumer markets (brand prestige, collectibles), labor markets (self-assessed value or wage expectations), and online ecosystems (promotion of digital goods or reputational assets). It tends to increase price volatility and resource misallocation when driven mainly by perception rather than fundamentals.

Relation to other concepts: It relates to self-fulfilling prophecies, inflation expectations, and hype cycles, while remaining distinct from monetary inflation. Critics warn that it can distort decision-making and policy responses if treated as genuine economic inflation.

See also: inflation, behavioral economics, self-fulfilling prophecy, market bubbles, signaling theory.