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Welfare improving barter in imperfect competition

Author

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  • CRESTI, Barbara

Abstract

This paper offers a rationale for the development of the barter industry in industrialized economies. It argues that, in a context of imperfect competition, barter represents a profitable and efficient system of exchange. Thanks to barter, even if already at the optimum, a monopolist can still reduce the production costs and thus increase profits. Moreover, by adopting a barter strategy, he also improves social welfare, as he raises total output and decreases market price. Social welfare improvement is maximum when the monopolist fully satisfies his barter requirements, for which the presence of a well-organized barter market is crucial.

Suggested Citation

  • CRESTI, Barbara, 2002. "Welfare improving barter in imperfect competition," LIDAM Discussion Papers CORE 2002071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2002071
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2002.html
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    More about this item

    Keywords

    Barter; Imperfect Competition; Social Welfare;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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