Markets increase social welfare by matching willing buyers and sellers. It is important to understand whether markets are fulfilling their societal purpose and are operating efficiently. The prevalence of spatial arbitrage in markets is an important indicator of market efficiency. The two essays in my dissertation study spatial arbitrage and the behaviors of arbitrageurs Electronic commerce can improve market efficiency by helping buyers and sellers find and transact with each other across geographic distance. In the first essay, we study the effect of two distinct forms of electronic commerce on market efficiency, which we measure via the prevalence of spatial arbitrage. Spatial arbitrage is a more precise measure than price dispersion, which is typically used, because it accounts for the transaction costs of trading across distance and for unobserved product heterogeneity. Studying two forms of electronic commerce allows us to examine how the theoretical mechanisms of expanded reach and transaction immediacy affect market efficiency. We find that electronic commerce reduces the number of arbitrage opportunities but improves arbitrageur’s ability to identify and exploit those that remain. Overall, our results provide a novel and nuanced understanding of how electronic commerce improves market efficiency. Studying arbitrageur strategies will help us understand how arbitrageur behaviors impact markets by increasing/reducing spatial arbitrage. In the second essay, we study specialization strategies of arbitrageurs. Arbitrageurs specialize on asset type and sourcing locations. We investigate the role of specialization and find that specialization affects both arbitrage profits and arbitrage intensity. Subsequently, we find that specialization strategies evolve over time and different groups of arbitrageurs adapt differently based on behavioral biases and environmental factors. Overall, our findings support the predictions of the adaptive markets hypothesis and help us understand antecedents such as capital, arbitrage intensity, etc. which affect the evolution of arbitrageur strategy.