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Friday, October 31, 2008

When Arbitrage Doesn’t Work

High rate, low rate. Buy low, sell high. Pocket the difference.

Not so fast.



Narrator: The sellers are trying to save the situation and are even playing into each other’s hands. In Kyiv’s Podil, side by side there are two currency exchange outlets of different commercial banks. In one, they buy the dollar at Hr. 6.65, in the other they sell the dollar at Hr. 6.45. But the thing is, in the “cheap” kiosk you can only sell the dollar at Hr. 6.15, while in the “expensive” one you can only buy the dollar at Hr. 6.95. Vikna did an experiment: We bought 10 dollars at Hr. 6.95, and a few minutes later, in that same place, we tried to sell them at Hr. 6.65. Still, once again, the kiosk didn’t have even 70 hryvnias in store for us.

Reporter [edited for clarity]: You should at least have enough hryvnia for 10 dollars, right?

Kiosk manager: [struck speechless, produces a “you got me” smile while chewing gum]

Reporter: I just sold you 10…
Kiosk manager: Yes, you did.

Reporter: I just bought 10 dollars from you, so you should have something in the way of hryvnia for that 10 dollars, right?
Kiosk manager: Well, I do.

Reporter: Then why did you…why didn’t you take the dollars from this man?
Kiosk manager: [gives a guilty look]


Well done, Vikna!

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/100955.html

Original source: http://www.stb.ua

6 comments:

elmer said...

They really don't want to stay in business, do they?

If you tell people one thing, and then simply cheat them, you may get a few "dollars" in the short term, but in the long run, people catch on.

And in the even shorter term, people catch on even more quickly when TV programs justifiably and factually produce severely negative stories about your "business" like this.

Gabriela García Calderón said...

Hello Taras:
Have you seen this?
http://aesyd.blogspot.com/2008/11/prmio-libertas.html
Saludos desde Lima.

Taras said...

Elmer, never underestimate the short memory some customers have.

Plus, it’s not just locals who patronize their outlet. With that in mind, they decided to do a little trick shorting the dollar, once the hryvnia bounced back a little bit.


Gabriela, I’ve seen it now!

It’s a great honor to be so highly rated by a blogger who built a bridge for Ukraine into the Hispanic blogosphere. As a GVO contributor, you’re in the bridge-building business, too:)!

Saludos desde Kyiv!

elmer said...

Taras, the word gets around.

There are businesses that have been built on reliable - and trustworthy - foreign currency exchange.

It may not seem like it, but the word gets around.

Even if these shysters are "successful" in the short term.

Gabriela García Calderón said...

Marta and you flatter me.
Your is a country I'd love to visit. Maybe some day, who knows...

Taras said...

Yes, in many cases word-of-mouth works. Yet in many cases, and as you know in Ukraine especially, it doesn’t. Happy Election Day:)!

That’s not flattery, Gabriela! You’re doing great work. I, in turn, would love to visit Peru:)