Archives for arbitrage



A Brave New World for Copyright and the First Sale Doctrine

Arbitrage is defined as taking advantage of price differences between two markets. A few years ago Supap Kirtsaeng, a math major at Cornell, found that his textbooks could be purchased more cheaply in his native Thailand than in Ithaca, so he asked friends to buy the books there and ship them to him. He started selling them on eBay and soon cleared almost $40,000. Eventually a major textbook publisher, John Wiley & Sons, got wind of Kirtsaeng’s business and filed a copyright lawsuit.

That the suit involved copyright may seem odd, since Kirtsaeng wasn’t copying anything. He was just re-selling items that he’d already paid for — a time-honored way to make money in almost any economy.

But because the items were books, some special rules applied. The textbooks were foreign editions (i.e., printed abroad), and Wiley had inserted the following language into the title pages: “This book is authorized for sale in Europe, Asia, Africa, and the Middle East only and may be not exported out of these territories. Ex­portation from or importation of this book to another region without the Publisher’s authorization is illegal and is a violation of the Publisher’s rights.” Wiley argued that by importing the books Kirtsaeng was violating the copyright owner’s exclusive right under the U.S. Copyright Act to authorize distribution.  Read More »



Scooby-Doo Arbitrage

A student writes that she understood arbitrage at age seven.  She brought Scooby-Doo Fruity Snacks from her grandmother’s house (no charge to my student) to her Vacation Bible School class.  She was a monopolist in the class—nobody else brought snacks; and since the demand was quite inelastic, she was able to sell her Fruity Snacks for a good price.  Regrettably, her business was shut down because, as the teacher said, she was engaging in “uncharitable exploitation of [her] peers.”  She was also invited not to return to Bible School, showing that clever economic behavior may only  pay monetarily. (HT: CAP)



Banana Arbitrage

Bananas are a popular topic on this blog. In February, a reader wrote in with this odd banana stand pricing phenomenon. And in 2008, Dubner explored the potentially tenuous economics of the far-flung fruit.

I’ve recently run across something similar to the banana stand case: the Starbucks closest to my apartment now sells bananas at the counter for $1 each, while right outside the door, a fruit stand sells them for 25 cents each, or 5 for $1. And the fruit stand bananas are always better looking than the ones at the Starbucks register. Read More »



FDIC Takes Aim at Bank Arbitrage Profits

The FDIC has imposed a fee that makes it more expensive for banks to borrow in the overnight ‘repo’ market. The intent appears to be to reduce easy arbitrage profits for big banks and smooth credit markets in the long term. Read More »