Arbitrage means buying in one market and selling in another where the price is higher. Its effect is to pull the two prices closer together, which is also why arbitrage makes price discrimination hard to sustain.

A classic illustration comes from the economics literature. Rohm and Haas produced a plastic material with both industrial and dental applications. In industry the material had many substitutes; in dentistry it had very few. The same product was therefore priced at roughly 85 cents per pound for industrial buyers and around USD 22 per pound for dental buyers. These are the figures from the original case study, not current prices.

A gap of that size invites arbitrage: buy the industrial grade, resell it into the dental market, and capture the difference.

In practice this is where the theory meets regulation. Reselling material into a medical or food-grade application on the strength of an industrial specification is not a pricing strategy; it is a compliance and product liability problem. The commercial question in real trade is narrower: whether a price gap between two markets survives freight, duties, certification and the cost of proving that the goods conform.

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