This article is LTG GoldRock to share with you what are the restrictions on the law of one price ~
Psychological factors
In all parts of the world, even if the quality of the goods is exactly equal, its value evaluation is not the same.Because the internal value is reflected in the subjective cognition of the buyer and the seller, and it is objectively reflected through the supply price and the demand price .The subjective cognition is mainly about cultural background , such as the acceptance of Starbucks coffee around the world.Therefore, these psychological factors will affect the needs of buyers and promote suppliers to use different pricing methods , resulting in reality may not be in line with the theory.
time difference
This law is not suitable for cross -time situation, so the price of the same market will change over time.However, the situation of the financial market is exception. This is because the price set by the market dealer in the market market will continue to move.However, the law of one price is still valid when each single transaction is executed.
The best example is the spread trading (Carry Trade ). The spread transaction is based on different interest rates based on different currencies. The difference in interest rates leads to the exchange rate of the two currencies in the opposite direction.Once investors find differences in interest rates, there is obviously there is opportunities for arbitrage. He only needs to borrow a low interest rate currency to exchange for high interest rate currency, earn extra interest and then return the principal of the original currency measurement .Complete a spread transaction.在这过程中，利率历经时间的变化，随著越来越多投资者把握该无风险的套利机会，而进行外汇买卖赚取高利息，两种货币的利率差异将不复存在，因为外汇市场 exchange rate has been promoted by many transactions and restored to balance.The nature of interest rates is the price or time cost of borrowing funds . In the end, the two currency interest rates are the same in line with the law of price.
Information asymmetry
If the information is asymmetric in the transaction, the buyer cannot know who the lowest price is, and the law of one price is not applicable.In this case, sellers need to weigh in the frequency and profitability of transactions.Enterprises may set up high or low prices. The former leads to the inactivation of transactions because consumers always want to search for the lowest price; the latter increases the sales of enterprises, but the profit income is less than before.
Barlasa-Samuelson Effect
The Barlasa-Samuelson effect believes that the law of one price is not necessarily universal in all items in the world, because certain items cannot be traded outward.The theory believes that consumption in some countries is cheaper than other countries, and is due to the relatively cheap national non -trading items that are lacking in development, especially land and labor.This leading to a lack of development has a typical low -cost consumer goods, although the price of some items is flattened by international trade activities .
Examples of violation of laws
An example that is often cited by scholars is the Dutch Royal Petroleum and Shell Stocks.The two companies merged in 1907. The Royal Dutch oil stocks were traded in Amsterdam , while shell stocks were listed in London . The original business was allowed to operate independently, but the total profit of both parties must beFollowed by the June 4th, allocated.With the expected income change, Royal Dutch oil stock value should therefore be 1.5 times the value of the equivalent stock stock based on each unit.However, after the incident, the stock price has long been deviated from the gap between the theoretical expectations, and the percentage of the percentage is as high as 15%.This deviation began to decline until 1999, and the final merger was ended in 2005.
