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tarasen57 tarasen57
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Posts: 394
A week ago

Question 1.

A firm's efforts to increase profit by price discrimination can be undermined by



consumer ignorance.



seller market power.



arbitrage by buyers.



differences in elasticity of demand.



Question 2.

According to a New York Times article, shoppers from New York City have played a game of "retail arbitrage" by shopping at malls in Northern New Jersey, a state where there is no tax on clothing and shoes. Even after accounting for transactions costs, shoppers could still save money on their clothing and footwear purchases.

Source: Ken Belson and Nate Schweber, "Sales Tax Cut in City May Dim Allure of Stores Across Hudson," New York Times, January 18, 2007.

Is the term "arbitrage" correctly used here?



No, "arbitrage" does not apply to markets that are not in the same geographic area.



Yes, because shoppers were able to purchase items at lower prices even after deducting their transactions costs.



Yes, arbitrage applies even if no resale takes place; in this case the profits are pocketed by the customers themselves.



No, "arbitrage" means buying at a low price and reselling at a higher price but no resale takes place here.

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christinaalexchristinaalex
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Posts: 315
A week ago
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Answer 1

arbitrage by buyers.



Answer 2

No, "arbitrage" means buying at a low price and reselling at a higher price but no resale takes place here.

1

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Thank you, thank you, thank you!
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