Matt Levine, Columnist

EBay Arbitrage and Airline Competition

Also high-frequency trading towers, Bridgewater, bank debt, addiction, etc.

July 29, 2016 at 1:29 PM UTC

Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.

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Intermediation.

Here is a wonderful story about this simple Amazon/EBay trade: You notice that someone is selling a product for $39.99 on Amazon, you copy and paste his listing into EBay, but you set the price at $49.51. Then, if anyone buys from you, you just order it from him on Amazon, have him ship it to your buyer (use the gift shipping option), and pocket the $9.52 spread. That's it. The whole trade is just listing something online for a higher price than it's listed for elsewhere online, and hoping that someone pays you. Lots of people do, apparently. This is called "Amazon-to-eBay arbitrage," though "arbitrage" feels like too fancy a word for what it is. It is almost the opposite of arbitrage. Arbitrage is about noticing violations of the law of one price, and then trading in two markets to (make money and) bring prices into line. This is about noticing a perfectly sensible market with one price, and then creating your own, different price in a slightly different market, hoping that no one will notice. Arbitrage makes markets more efficient. This makes them more annoying.