Arbitrage is the purchase and resale of some good in different markets at a premium without adding any value. For example, let us say that the price of a bushel of blue crabs is $300 in Baltimore, Maryland, but a bushel of the same blue crabs would go for $325 in Washington, DC. Then, it would be wise for me to buy blue crabs in Baltimore and immediately sell them in Washington, at a profit of $25 per bushel (ignoring the cost of transportation). Note that arbitrage only applies to goods, and not services. Although arbitrage could occur in any context, when we say arbitrage we are usually referring to the stock market, where some security can be bought on one market and resold on another at a higher price. In an efficient market, this should not be possible. But since people take time to make decisions and there are transaction costs are present, arbitrage is possible.