Tradable
Encyclopedia
Tradability is the property of a good
Good (economics and accounting)
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form—goods—to denote tangible commodities such as products and materials....

 or service that can be sold in another location distant from where it was produced. A good that is not tradable is called non-tradable. Different goods have differing levels of tradability: the higher the cost of transportation and the shorter the shelf life, the less tradable a good is. Prepared food, for example, is not generally considered a tradable good; it will be sold in the city it is produced, and does not directly compete with other cities' prepared foods.

Price Equalization

Perfectly tradable goods, like shares of stock, are subject to the law of one price
Law of one price
The law of one price is an economic law stated as: "In an efficient market, all identical goods must have only one price."-Intuition:The intuition for this law is that all sellers will flock to the highest prevailing price, and all buyers to the lowest current market price. In an efficient market...

: they should cost the same amount wherever they are bought. This law requires an efficient market. Any discrepancy that may exist in pricing perfectly tradable goods, due to Foreign Exchange Market
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...

 movements for instance, is called an arbitrage
Arbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...

 opportunity. Goods that cannot be costlessly traded are not subject to this law.

Less than perfectly tradable goods subject to distortions such as the Penn effect
Penn effect
The Penn effect is the economic finding associated with what became the Penn World Table that real income ratios between high and low income countries are systematically exaggerated by gross domestic product conversion at market exchange rates...

, for example, a lowering of prices in less wealthy place. Perfectly nontradable goods are not subject to any leveling of price, thus the disparity between similar parcels of real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...

 in different locations.

There should be no distortions in purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...

for perfectly tradable goods. The differences between PPP and other methods are the result of non-tradable goods and the above-mentioned Penn effect.
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