Law of One Price

Law of One Price
May 15 15:59

Arbitage and One Price Theory

The Law of One Price is essentially the idea that where competitive markets exist and information is inexpensive, exchange adjusted prices for identical products must be within a certain range of equality worldwide (Shapiro).  In other words, identical products in perfect economic environments should be the same price.  However, no market is 100% efficient making arbitrage possible and profitable.