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. Arbitrage can be described as the profit or exploitation of a difference(s) in prices between domestic and international markets and may involve the price of goods, currencies, interest rates etc.  The Purchasing Power Parity theory assumes that one currency should hold the same purchasing power world-wide.  While the Law of One Price and  Purchasing Power Parities are useful in determining inflationary trends it is in their intrinsic flaws that arbitrage is possible. Arbitrage often occurs through localized price spikes when involving commodities. (Coleman). Exporting arbitragers can offset some future costs by taking advantage of price fluctuations caused by transportation and holding expense.  Arbitrage occurs with differentiated products internationally where price discrepancies between local and international markets provide opportunity for profit.  This can occur when multinational companies sell an identical product for different prices in individual markets.  An arbitrager may export goods back to their originating country for a profit. Arbitrage occurs in currency markets where fluctuations in ‘real’ rates differ from the ‘spot’ rate.  Multinational or global corporations often hedge currency risk by moving funds around the globe.  Where arbitrage involves a difference in interest rates world-wide, currency fluctuations, and rates of inflation are often the defining source.  Arbitrage theory asserts that no two countries experience the same rate of inflation at a given time. Citation Coleman, Andrew. "Storage, Slow Transport, and the Law of One Price: Theory with Evidence from Nineteenth-Century U.S. Corn Markets." Review of Economics and Statistics 91.2 (2009): 332-50. <http://dx.doi.org.lib-proxy.fullerton.edu/10.1162/rest.91.2.332>. Shapiro, Alan C and Atulya Sarin.  Multinational Financial Management. 6 e.d. NJ.  Wiley & Sons Inc:  2009.