Resource title

A model of countertrade

Resource image

image for OpenScout resource :: A model of countertrade

Resource description

Countertrade - or reciprocal buying - is defined as a transaction involving (at least) a two-way transfer of goods, rather than a singular transfer of goods for money. The main objective of this paper is to explain the extensive use of countertrade both between countries and between firms within one country. In a simple game-theoretic model it is shown that countertrade may be a rational business strategy for firms with buying power, and that the impact on welfare is negative, even in the case where no firm exists. The model is consistent with the observations that countertrade occurs mainly in homogeneous goods industries, that trades are relatively balanced and that the practice is more widespread during recessions than during booms.

Resource author

Resource publisher

Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://eprints.lse.ac.uk/6782/1/A_Model_of_Countertrade.pdf

Resource license