ARBITRAGE ACROSS BORDERS: WHY ITUNES GIFT CARDS SELL ABOVE FACE VALUE ON EBAY

Authors

  • CHEN FENG NG

    1. Ng: Department of Economics, California State University Long Beach, Long Beach, CA 90840-4607. Phone 562-985-8513, E-mail Chen.Ng@csulb.edu
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    • I am grateful to Antony Bina, Yutian Chen, Alejandra Edwards, Karen Fawson, Iris Franz, Kristen Monaco, Kenneth Small, Seiji Steimetz, participants of the Western Economic Association International annual conference, and two anonymous referees for helpful comments.


Abstract

This paper is one of the first to explore international price differences and arbitrage opportunities in the market for downloadable content, by linking the sale of iTunes gift cards above face value on eBay to the arbitrage of iTunes' products (which include downloadable music and videos). This paper shows that iTunes gift cards targeted to non-U.S. buyers tend to sell for higher prices, controlling for seller reputation, shipping costs, and other variables. Information about the buyers' countries allows us to see whether it is the U.S. store's greater product availability or its lower prices that buyers are interested in. (JEL D40, L10, F10)

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