Arbitrage is a trading transaction where you buy low and then sell high.

More specifically, you buy a low-priced good in one market and resell the same product in a market where its price is higher. The effect of arbitrage is to bring the prices in these two markets closer together. It therefore makes it harder for firms to engage in price discrimination. Let's see this with an example.

Rohm and Haas is a specialized producer of plastic materials. It produces a plastic material that has both industrial and dental uses.

Although this plastic has various substitutes in industry, there are very few substitutes used in dentistry.

Therefore, it is cheaper in industry than in dentistry. Its price is 85 cents per pound versus $22 per pound.

Of course, with such a price difference, entrepreneurs start to arbitrage. This is where the arbitrage starts.

Buy industrial plastic, turn it into plastic for prosthetics, and then sell it at a higher price.

You can contact us for arbitrage.