One Price Only

Mikan, Hotaru and Inchou went to Central Town to shop, they saw that all M & M's prices in one store were always the same, identical. Did one ever wonder why? The prices of a bar of Baby Ruth across the street and in the next block have the same price also,

There is a law in economics that states that if two goods are identical, they must sell for the same price. It sounds harmless and undisputable. It is in fact an obvious dazzling statement skeptics complain about.

Suppose Christina Aguilera is giving a concert at Wembley Stadium in London two weeks from now. All tickets for the show have been sold at face value though the usual distribution channel across the UK. High demand for the show created a black market working outside legitimate ticket outlets, in pubs, on the street corner, and in discos.

And if a prime seat is sold at ₤100 in the black market, would it still be the same price if sold in Manchester? By the law of one price, of course, it will be ₤100. In reality, under these circumstances, one would probably find tickets of the same category on sale at more or less the same price in different towns.

Why does it tend to be like this? Pretend that the tickets in Manchester were ₤5 less than those sold in Birmingham, then anyone in Birmingham could buy there ticket in Manchester. Those in Manchester would not even think of buying in Birmingham. The end result is that sellers in Birmingham would not be able to sell many tickets as long as there are price differentials.

If such things were true, it would take at least a week more before word reaches Birmingham that prices are lower in Manchester. Fans of Christina Aguilera would not likely know of the cheaper price on a street corner in Manchester or in a tabloid ad page. And when that time comes, it would be the big day already or even past the concert day.

There are people who make a living of exploiting such a situation. They are keen in divergences like this. In such a case of Christina Aguilera's concert and the rumor of price difference between Birmingham and Manchester, they will simply drive over to Manchester, buy tickets and sell them in Birmingham. What an easy way to get for each ticket sold a profit equal to the differences in price.

To make ends with the difference in price, Birmingham sellers would lower their price to ₤47 so the incentive is reduced and no exploits will happen. With so narrow change in price, people in Birmingham would not likely travel to Manchester to just buy a ticket.