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I just returned from a trip to the US, and noticed the same thing -- but just on books. There were few, if any, bargains to be had otherwise. The prices I saw on other products were usually worse than Canadian prices (after adjusting for the exchange rate).

So I wonder if this arbitrage opportunity only exists for books. Books are unusual in that they're almost the only product where prices in both $CAN and $US are printed directly on the item. (Apart from the exchange rate anomaly, why is that?)

Perhaps the reason for the discrepancy is that stores can easily charge less than cover price, but not more. Since a book could easily sit on the shelves for a couple of years, better to protect against the exchange rate moving by asking a high exchange rate and then letting the Canadian store discount as appropriate.

Not a very plausible theory, but the only one I can think of. If it's correct, we should see the spread narrow over the next few years if the exchange rate stays low.

Professor Gordon, are you saying that there are other products than books for which a high implied exchange rate applies? What are they?

The only first-hand information I have is my sabbatical in San Diego in 1999, a couple of years before the CAD started its rise. Our first trip to the grocery store was a shock: everything was the roughly same price as back home, but in USD. Ouch.

It may well be that the rise in the CAD since then has erased this gap. The point is that the movements in exchange rates take forever to show up in consumer prices.

I'm willing to bet a bunch of money you can get a better discount than 16 or 17% for 1000 books if you buy from the publisher directly. I suspect a 50% or so discount is a better neighborhood.

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