Law of One Price

• result … no-friction world → barriers removed
• Walras system of equations
• similar to “natural price” of Adam Smith but with spatial dimension
• equilbrium seldom reached
  • high transport cost
  • information asymmetries
  • slow adjustment time / slow information exchange

Weak Law of one Price

• bc of transport, etc costs prices are never the same
• BUT prices move together
  • falling prices in place X is similar to falling prices in Y