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Payments in Kind

  • Ellingsen, Tore

    ()

    (Dept. of Economics, Stockholm School of Economics)

Payments in kind pose an enduring and empirically important puzzle. The paper provides a formalization of the popular view that payment in kind are due to financial constraints. The key assumption is that buyers' liquidity is private information. Buyers who are financially constrained may prove their hardship by making part of the payment in kind. The paper models explicitly the credit market imperfections which lead to payments in kind and yields predictions which are consistent with a number of empirical observations. In particular, it offers a coherent explanation for the recent explosion of barter in Russia and other former Soviet republics.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 244.

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Length: 28 pages
Date of creation: 09 Jun 1998
Date of revision: 10 Feb 2000
Handle: RePEc:hhs:hastef:0244
Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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  1. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  2. Marin, Dalia & Schnitzer, Monika, 1999. "Disorganization and Financial Collapse," CEPR Discussion Papers 2245, C.E.P.R. Discussion Papers.
  3. Caves, Richard E. & Marin, Dalia, 1992. "Countertrade Transactions: Theory and Evidence," Munich Reprints in Economics 3111, University of Munich, Department of Economics.
  4. Kehoe, Timothy J & Kiyotaki, Nobuhiro & Wright, Randall, 1993. "More on Money as a Medium of Exchange," Economic Theory, Springer, vol. 3(2), pages 297-314, April.
  5. Ellingsen, Tore & Stole, Lars A., 1996. "Mandated countertrade as a strategic commitment," Journal of International Economics, Elsevier, vol. 40(1-2), pages 67-84, February.
  6. Marin,Dalia & Schnitzer,Monika, 1993. "Tying trade flows: A theory of countertrade," Discussion Paper Serie A 396, University of Bonn, Germany.
  7. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
  8. Oliver Hart & John Moore, 1997. "Default and Renegotiation: A Dynamic Model of Debt," Harvard Institute of Economic Research Working Papers 1792, Harvard - Institute of Economic Research.
  9. Marin, Dalia & Schnitzer, Monika, 1997. "The Economic Institution of International Barter," CEPR Discussion Papers 1658, C.E.P.R. Discussion Papers.
  10. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
  11. Choi, Chong J. & Maldoom, Daniel, 1992. "A simple model of buybacks," Economics Letters, Elsevier, vol. 40(1), pages 77-82, September.
  12. Brennan, Michael J & Maksimovic, Vojislav & Zechner, Josef, 1988. " Vendor Financing," Journal of Finance, American Finance Association, vol. 43(5), pages 1127-41, December.
  13. Daniel Kaufman & Dalia Marin, 1998. "Disorganization, financial squeeze, barter," William Davidson Institute Working Papers Series 165, William Davidson Institute at the University of Michigan.
  14. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  15. Smith, Janet Kiholm, 1987. " Trade Credit and Informational Asymmetry," Journal of Finance, American Finance Association, vol. 42(4), pages 863-72, September.
  16. Chan, Raissa & Hoy, Michael, 1991. "East--West joint ventures and buyback contracts," Journal of International Economics, Elsevier, vol. 30(3-4), pages 331-343, May.
  17. Canice Prendergast & Lars Stole, 2001. "Barter, Liquidity and Market Segmentation," CESifo Working Paper Series 586, CESifo Group Munich.
  18. Canice Prendergast & Lars A. Stole, 1996. "Non-Monetary Exchange Within Firms and Industry," NBER Working Papers 5765, National Bureau of Economic Research, Inc.
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