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Non-Monetary Exchange Within Firms and Industry

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  • Canice Prendergast
  • Lars A. Stole

Abstract

This paper considers why non-monetary means of exchange, such as barter and the reciprocation of favors, are chosen by firms despite the usual benefits of monetary transactions. We consider the chosen means of exchange when both monetary and non-monetary exchange mechanisms are available. We illustrate three potential reasons for the emergence of non-monetary trade. First, a willingness to barter may reveal information that cannot be revealed solely through monetary trade. Second, non-monetary trade may constrain the ability of agents to engage in inefficient rent-seeking activities. Finally, non-monetary trade improves the ability of agents to impose trade sanctions on those who act dishonestly. We consider a number of applications of each of these ideas.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5765.

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Date of creation: Sep 1996
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Handle: RePEc:nbr:nberwo:5765

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  1. Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Munich Reprints in Economics 19763, University of Munich, Department of Economics.
  2. Hennart, J.-F.M.A., 1989. "The transaction cost rationale for countertrade," Open Access publications from Tilburg University urn:nbn:nl:ui:12-175838, Tilburg University.
  3. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
  4. Hennart, Jean-Francois & Anderson, Erin, 1993. "Countertrade and the Minimization of Transaction Costs: An Empirical Examination," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 290-313, October.
  5. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  6. Williamson, Oliver E, 1984. "Credible Commitments: Further Remarks," American Economic Review, American Economic Association, vol. 74(3), pages 488-90, June.
  7. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
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Cited by:
  1. Brana, S. & Maurel, M., 1999. "Barter in Russia : Liquidity Shortage Versus Lack of Restructuring," Papiers d'Economie Mathématique et Applications 1999.98, Université Panthéon-Sorbonne (Paris 1).
  2. David S. Scharfstein & Jeremy C. Stein, 1997. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," NBER Working Papers 5969, National Bureau of Economic Research, Inc.
  3. Canice Prendergast & Lars Stole, 2001. "Barter, Liquidity and Market Segmentation," CESifo Working Paper Series 586, CESifo Group Munich.
  4. Byung-Yeon Kim & Jukka Pirttilä & Jouko Rautava, 2002. "Money, Barter and Inflation in Russia," Macroeconomics 0209009, EconWPA.
  5. Richard B. Goud Jr., 2002. "Inter-Firm Non-Monetary Transactions in Russia: A Literature Review," Development and Comp Systems 0207001, EconWPA.
  6. Ellingsen, Tore, 1998. "Payments in Kind," Working Paper Series in Economics and Finance 244, Stockholm School of Economics, revised 10 Feb 2000.

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