You Are Watching TV Late One Night and See an Ad

question 89

Short Answer

You are watching TV late one night and see an ad from Ronco for the Dial-o-matic food slicer. You learn that the Dial-o-matic sells for $29.95. Ronco also includes a set of Ginsu steak knives worth $10.95 and another free gift worth $7.95 in this deal. Assuming that there is a competitive market for Ronco items, at what price must Ronco offer this three item Dial-o-matic deal to ensure the absence of an arbitrage opportunity and uphold the Law of One Price?

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Definitions:

Examples

Specific instances or cases that are used to illustrate a principle, method, or situation.

Reverse Auction

An auction format in which sellers bid to offer goods or services at the lowest price to a buyer, reversing the traditional auction model.

Would-Be Suppliers

Potential providers of goods or services that are considering entering a specific market or supplying a particular customer or company.

Bid Competition

A procurement process where vendors or contractors submit their proposals or bids, competing to win a contract based on price, quality, and/or service criteria.