Comment by krupan
2 years ago
People don't understand that the free market system is essentially a law of physics. You saying that a producer/seller of a limited good (in this case, space in a concert venue) cannot choose their own price is true, like it's also true that a person can't decide whether gravity pulls them down or not. You explained it pretty well yourself, the effect of supply and demand is unavoidable
I wonder though does it have to be limited. Like imagine I could make enough apples to fully satisfy the market demand for apples and I’m also willing to sell to anyone.
I want to sell those apples for $1 each. There’s plenty of apples to satisfy the demand. But let’s say that the market would bear a higher price, people would love to buy apples for $1 but due to a love of apples would be willing to pay up to $5.
In that scenario, the arbitrage opportunity still exists. Apple scalpers knowing that people would be willing to pay up to $5 would want to buy up lots of cheap apples and make the $4 profit that I’m leaving on the table for themselves.
And there’s just nothing we can do about it. I think we’d say that when the equilibrium price of $5 is met that the market is efficient but it’s a market where the producer of the good can fully satisfy the demand of the market for $X and yet the consumers have to pay $5X and this arbitragers get $4X.
It’s just interesting is all.
If you are able to perfectly meet demand why would anyone pay more than your price? What service or improvement are the arbitragers providing above and beyond what you are providing that incentivizes people to pay more than your price?