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Barter, Liquidity and Market Segmentation Author info | Abstract | Publisher info | Download info | Related research | Statistics Canice Prendergast ()
Lars Stole ()
This paper explores the private and social benefits from barter exchange in a monetized economy. We first prove a no-trade theorem regarding the ability of firms with double-coincidences-of-wants to negotiate improvements in trade among themselves relative to the market outcomes. We then demonstrate that in the presence of liquidity shocks, introducing a non-monetary exchange avoids this limitation and enhances trade by (1) generating liquidity and (2) by segmenting the market place into low-demand and high-demand customers in a manner which is impossible with pure monetary exchange. We provide comparative statics illustrating the importance of each effect and relevant extensions.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 586.
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Date of creation: 2001Date of revision:
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Keywords: barter ; exchange ; Find related papers by JEL classification: C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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Jose Noguera & Susan Linz, 2003.
"A Theoretical Model of Barter in Russia ,"
CERGE-EI Working Papers
wp207, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
[Downloadable!]
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