Law of the Indifference in Prices

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The (Jevons') law of the indifference in prices , also called the law of the uniform price , the law of the uniform price is a law of microeconomics named after William Stanley Jevons and states that under the conditions of the absence of trade barriers, free competition and price flexibility are identical Goods that are sold in different locations must have a uniform price if they are expressed in the same currency.


The law states that a single price only has to arise on the market for a good if

omitted as well

  • perfect information

prevails. These conditions describe the perfect market .

"In the same open market, at any moment, there cannot be two prices for the same kind of article."

- William Stanley Jevons: Theory of political economy, p. 92

"In the same perfect market, there can never be two prices for the same good."

In the absence of perfect information, one suspects a temporarily imperfect market. Temporary because, even in the absence of complete information, the market tends to have uniform prices because the market participants observe the pricing of the other market participants and orient their pricing to those of the competitors. This means that the uniform price may arise with a time delay.

If one of the other conditions does not apply, the market is called imperfect .


The law of the same price states that two financial instruments that generate identical cash flows must have the same price. This principle can serve as the basis for determining the option price . To determine the (unknown) price of an option, it is only necessary to find a portfolio with a known price that has the same cash flows as the option. By law, the option must have the same price as the portfolio.


Arbitrage describes the possibility of a risk-free profit without using your own capital. Opportunities for arbitrage arise when two identical securities are priced differently, for example at different trading venues. The investor can now, ideally without using his own capital, sell the security short at the more expensive marketplace and stock up on the cheaper marketplace with the same number of securities. His profit is the difference between the two prices. In an efficient market , the law of one price means that there are no opportunities for arbitrage.

The law does not always apply empirically, which is attributed to trade barriers such as tariffs and taxes as well as unexpected exchange rate fluctuations.

Other phenomena

The Jevons paradox was named after Jevon, but it is not directly concerned with prices but with the demand for goods.


  • William Stanley Jevons: Theory of political economy , 1871
  • Walter Kortmann: Microeconomics: Application- related basics , 4th edition, 2006, ISBN 9783790816983 , page 354, online

Individual evidence

  1. ^ David Ruppert: Statistics and Finance: An Introduction. 2006, Springer, ISBN 978-0387202709 , p. 259 ff
  2. Thomas SY Ho, Sang Bin Lee: The Oxford Guide to Financial Modeling: Applications for Capital Markets, Corporate Finance, Risk Management and Financial Institutions. 2004. Oxford University Press, ISBN 978-0195169621 , pp. 54 ff
  3. ^ Colin A. Carter: Futures and Options Markets: An Introduction. 2007, Waveland Press, ISBN 978-1-57766-553-3 , p. 83 ff