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Arbitrage != asymmetric information. Arbitrage just means bridging different markets with different prices for the same item. The parties in one market may well
by nerfhammer 10y ago
Arbitrage != asymmetric information. Arbitrage just means bridging different markets with different prices for the same item. The parties in one market may well be aware that the prices are different in another market, they just can't/won't/don't bother to access the other market.
Information disparity between parties in contrast is referred to as "asymmetric information".
- pjlegato 10y agoThe case of importing from Ali, holding inventory, then reselling in the US is still not arbitrage. Arbitrage is by definition riskless simultaneous buying and selling of the same product in different venues. Since the Ali importer is buying and selling at different times, the importer is assuming the risk that the market clearing price in the US will change before their inventory can be sold.
- nerfhammer 10y agoOne academic definition of arbitrage includes zero risk, but usually not in contexts where it refers to something that happens in the real world, perhaps given that it's impossible in reality.
- pjlegato 10y agoActual arbitrage is very rare in the real world. If you're holding inventory at all, you're not doing arbitrage.