The practice of taking advantage of the price differences between two different markets. It is achievable by reaching agreements to buy and sell a product or service that capitalize on the price differences, thus realizing a profit
Arbitrage allows for the avoidance of investment risk in capital works and the upgrading of skills. What is required is the knowledge of market prices and the knowledge that both contracted parties are ignorant of each other and their true worth in the market. This ignorance is to the advantage of those looking for an arbitrage deal. Research gives the edge.
Arbitrage is legal, and it is often required by law because, for example, it is legally complex to sell a property by yourself without a licensed real estate agent in most countries. The difference in this model is that both the vendor and the buyer know that a third party is involved and know that a third party will charge a commission.
It is relatively easy to take advantage of arbitrage opportunities due to the advent of the internet. Gambling on sports events is an obvious example, but the profit opportunities can be mediocre because of the ease of accessing market prices. Work opportunities offer a better avenue of profit due to the introduction of websites such as Fiverr and Upwork. What is required here is knowledge of acceptable work because these websites often produce substandard work due to their sheer size and emphasis on speed.
Real-World Example of Arbitrage
A gap in the market has appeared when it comes to making banner ads. On Fiverr, a banner ad can be made for $5 and in an acceptable time. On Upwork, the rates tend to be higher, so you can put up a post that offers the same service for $10. Therefore, in theory, you can realize a $5 profit.
What are the real-world considerations to be addressed?
- Time and quality—make sure you know the people with whom you’re working.
- Having one post might not be enough—multiple posts across a range of sites might be required.
- Your post can be easily blocked.
- You’ll need a lot of traffic to succeed.
What you’re relying on is a lack of research by the buyer. There is no value-added service that you can provide in this situation. We could interview candidates for teaching jobs by contacting the employer and likely candidates. It could provide a helpful filter for the employer. Still, some countries prohibit foreigners or anyone else from performing criminal background checks which makes this avenue of work fraught with risk.
Arbitrage might also be amicable in the world of gambling on live events, but once again, the issue of internet seed and the fact that gambling websites take a dim view of this practice might limit your time doing this. The real world always presents problems that aren’t mentioned in YouTube videos. Arbitrage needs considerable time, and this time can only work if you have ignorant customers. In this age, the old saying from P.T.Barnum that a sucker is born every minute doesn’t quite ring true because it doesn’t take much research to discover alternative markets for those willing to do the work.