4 ms·

Is that what is called arbitrage ?

by lkozma 16y ago

SkyMarshal 16y ago
Not exactly. Arbitrage is exploiting mispricings of the same item in different markets. For example, say you buy an iPhone from Craigslist for $100, then turn around and sell it on Ebay for $150, netting you $50. Or conversely, you get an iPhone for your birthday for free, sell it on Ebay for $150, then buy a second one from Craigslist for $100, netting you an iPhone+$50. That's arbitrage. It sounds like makeramen's Pokemon trading all happened in basically the same elementary school market.
- electromagnetic 16y ago
  It's certainly the same market, however it's still hardly a level playing field. There's social niches, even in elementary schools, that people generally avoid drifting out of, however a nomad can drift between these niches and exploit mispricings in an individual market. It's not so much changing market, but being a supplier who looks for clients who haven't met the other suppliers in the market. It wouldn't be arbitrage, but it would be a nice way of exploiting newbies in a market. Sort of how Bestbuy profiteers off of having a well recognized names whilst being far off from having the best prices (I bought a surge protector the other day that they were selling for $20 more than the place across the street, I was smart enough to bring the other stores flyer and got 10% off extra).
- sigstoat 16y ago
  depends on what you consider to be the market(s). the north and south sides of the playground might have rather different valuations of a card. if you can realize that and safely transport your goods that distance, you've got an opportunity.
  - SkyMarshal 16y ago
    I guess that when I think of kids trading cards like Pokemon or Baseball cards, I envision kids from different social strata all religiously reading the Pokemon websites and having a similar idea of the value of the cards. But having done no card trading of any kind myself, I wouldn't really know, that's just an assumption based on a few observations and anecdotal evidence.
- eru 16y ago
  > Arbitrage is exploiting mispricings of the same item in different markets. There seem to be narrower and wider definitions of arbitrage. Some narrow definitions require arbitrage to be risk-free. Some wider definition accommodate things like statistical arbitrage (http://en.wikipedia.org/wiki/Statistical_arbitrage http://en.wikipedia.org/wiki/Statistical_arbitrage), which is far from certain and doesn't even use the same items, but just items with correlated prices.
  - SkyMarshal 16y ago
    True. A broader definition is probably 'exploiting price differentials of correlated assets'. Market is irrelevant, and both 'same item' and 'different but correlated items' are both subsets. And 'mispricing' presumes there's a true value, which may or may not be case.
    - eru 16y ago
      My personal definitions are backwards from that: I just define `mispricing' as anything that allows arbitrage. (Especially risk-less arbitrage. But you can -- in theory -- make almost all arbitrage as risk-less as you want, with the right derivatives.)
- maukdaddy 16y ago
  True arbitrage has to be riskless.

Is that what is called arbitrage ?

by lkozma 16y ago

Is that what is called arbitrage ?

Not exactly. Arbitrage is exploiting mispricings of the same item in different markets. For example, say you buy an iPhone from Craigslist for $100, then turn around and sell it on Ebay for $150, netting you $50. Or conversely, you get an iPhone for your birthday for free, sell it on Ebay for $150, then buy a second one from Craigslist for $100, netting you an iPhone+$50. That's arbitrage. It sounds like makeramen's Pokemon trading all happened in basically the same elementary school market.

electromagnetic 16y ago
It's certainly the same market, however it's still hardly a level playing field. There's social niches, even in elementary schools, that people generally avoid drifting out of, however a nomad can drift between these niches and exploit mispricings in an individual market. It's not so much changing market, but being a supplier who looks for clients who haven't met the other suppliers in the market. It wouldn't be arbitrage, but it would be a nice way of exploiting newbies in a market. Sort of how Bestbuy profiteers off of having a well recognized names whilst being far off from having the best prices (I bought a surge protector the other day that they were selling for $20 more than the place across the street, I was smart enough to bring the other stores flyer and got 10% off extra).
sigstoat 16y ago
depends on what you consider to be the market(s). the north and south sides of the playground might have rather different valuations of a card. if you can realize that and safely transport your goods that distance, you've got an opportunity.
- SkyMarshal 16y ago
  I guess that when I think of kids trading cards like Pokemon or Baseball cards, I envision kids from different social strata all religiously reading the Pokemon websites and having a similar idea of the value of the cards. But having done no card trading of any kind myself, I wouldn't really know, that's just an assumption based on a few observations and anecdotal evidence.
eru 16y ago
> Arbitrage is exploiting mispricings of the same item in different markets. There seem to be narrower and wider definitions of arbitrage. Some narrow definitions require arbitrage to be risk-free. Some wider definition accommodate things like statistical arbitrage (http://en.wikipedia.org/wiki/Statistical_arbitrage http://en.wikipedia.org/wiki/Statistical_arbitrage), which is far from certain and doesn't even use the same items, but just items with correlated prices.
- SkyMarshal 16y ago
  True. A broader definition is probably 'exploiting price differentials of correlated assets'. Market is irrelevant, and both 'same item' and 'different but correlated items' are both subsets. And 'mispricing' presumes there's a true value, which may or may not be case.
  - eru 16y ago
    My personal definitions are backwards from that: I just define `mispricing' as anything that allows arbitrage. (Especially risk-less arbitrage. But you can -- in theory -- make almost all arbitrage as risk-less as you want, with the right derivatives.)
maukdaddy 16y ago
True arbitrage has to be riskless.