IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/vtopics.4y2004i1n3.html
   My bibliography  Save this article

Trade and Linked Exchange; Price Discrimination Through Transaction Bundling

Author

Listed:
  • Dassiou Xeni

    (City University)

  • Choi Chong Ju

    (Australian National University)

  • Maldoom Dan

    (dan.maldoom@dotecon.com)

Abstract

In this paper we try to explain how price discrimination can cause bilateral trade patterns of the type seen under countertrade agreements. We interpret countertrade as a form of transaction bundling, which can discriminate between potential trading partners, and we combine characteristics from two explanations as to the existence of countertrade: Price discrimination through transaction bundling, and adverse selection arising from the uncertainty in the quality of the goods produced by trading partners in a less developed country (LDC) leading to a partner preference from the side of the Western (DC) firm. Our paper shows that the trade volume prospects of a firm in a LDC can be considerably enhanced if a countertrade transaction is bundled, and that such gains in trade become greater (relative to the case of no bundling), the greater the degree of quality uncertainty in the good it sells. It is also shown that it is profit maximising for a firm in a DC to offer mixed bundling for the exchange transaction, and that the profits derived from such bundling are a decreasing function of both the degree of uncertainty in the good sold by the firm in the LDC, and the marginal cost of the good sold by firm in the DC.

Suggested Citation

  • Dassiou Xeni & Choi Chong Ju & Maldoom Dan, 2004. "Trade and Linked Exchange; Price Discrimination Through Transaction Bundling," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-17, May.
    • Handle: RePEc:bpj:bejtec:v:topics.4:y:2004:i:1:n:3
    DOI: 10.2202/1534-598X.1102
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1534-598X.1102
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1534-598X.1102?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dassiou, Xeni & Glycopantis, Dionysius & Stavropoulou, Charitini, 2009. "Bundling in General Markets and in Health Care Systems," The Journal of Economic Asymmetries, Elsevier, vol. 6(2), pages 47-68.
    2. Dassiou, X. & Glycopantis, Dionysius, 2012. "Transactions Bundling in Monopsonistic Markets; Theory and Numerical Implications," The Journal of Economic Asymmetries, Elsevier, vol. 9(1), pages 105-131.
    3. Dassiou, Xeni & Glycopantis, Dionysius, 2008. "Price discrimination through transactions bundling: The case of monopsony," Journal of Mathematical Economics, Elsevier, vol. 44(7-8), pages 672-681, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:topics.4:y:2004:i:1:n:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.