Arbitrage
Definition. Arbitrage is the practice of buying a good in a market where its price is low and reselling it where the price is higher, profiting from the price difference. The possibility of arbitrage forces a firm to prevent resale if it wishes to charge different prices to different buyers.
It is why successful price discrimination requires the seller to keep markets separate. If consumers can resell freely, arbitrage erodes the price gap until discrimination breaks down.
This term belongs to Price Discrimination in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use arbitrage for marks in the exam? Learn it in class or message the team.