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Article economy_arbitrage_equilibrium

Published on March 14th, 2013 | by Dan Walsh

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Buy Low Sell High: Arbitrage And Equilibrium

“Buy low. Sell high.” Sounds simple enough, but like all good generalizations it doesn’t contain any actionable insights. How do you actually buy low / sell high? I read “Arbitrage and Equilibrium In The Team Fortress 2 Economy” by Yanis Varoufakis at the end of last year. The article reawakened my interest in economics – an interest that had otherwise been squashed by my High School Econ class. Varoufakis makes the concepts of arbitrage, aka “buy low / sell high” understandable and accessible by using the virtual economy of the popular video game “Team Fortress 2″.

Arbitrage is the holy grail of every trader. The dream of buying low and selling high (for this is what arbitrage is all about) is the driver of all commerce but also its own worst enemy: for as everyone is trying to pursue it, the potential for arbitrage disappears. And when it does disappear totally, we have equilibrium (the holy grail of the economists).

All rich men have been masters of economic principles in some form or another, and everyone’s salary is determined by the state of the economy. Even if you’re not interested in the subject, it does have a real impact on how we live our lives. The post can get a little dense, but if you can make it all the way through, you’ll immediately be 20% more intelligent about the world.

Read: Arbitrage and Equilibrium In The Team Fortress 2 Economy by Yanis Varoufakis

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