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Author Topic: Factor Price Equalization Theory in Crypto  (Read 18 times)
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March 21, 2018, 01:30:25 AM

According to wikipedia the theory of factor price equalization is an economic theory, by Paul A. Samuelson (1948), which states that the prices of identical factors of production, such as the wage rate, or the rent of capital, will be equalized across countries as a result of international trade in commodities. The theorem assumes that there are two goods and two factors of production, for example capital and labour. Other key assumptions of the theorem are that each country faces the same commodity prices, because of free trade in commodities, uses the same technology for production, and produces both goods. Crucially these assumptions result in factor prices being equalized across countries without the need for factor mobility, such as migration of labor or capital flows.

Basically if you have an item or service that is priced differently in one area or country, the prices will tend to equalize after time. Its an interesting thought on if this theory will actually work in the crypto verse. There is a token that has pegged its currency to Ethereum at 100 to 1 Ethereum. It is currently way below the price of that on a select number of exchanges and will need at least a 50X price increase to equalize with that price. They currently sell their tokens on their website at the 100 to 1 rate and do not have any plans to change that.

My question is do you think this theory will work in cryptocurrencies? How will this affect crypto in the future? I am just learning about this theory and I am intrigued and curious to see how it pans out in such a new economy.
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