Working Paper: NBER ID: w5765
Authors: Canice Prendergast; Lars 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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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonmonetary trade (F19) | information about hidden aspects of the transaction (D82) |
| nonmonetary trade (F19) | reduced rent-seeking (D72) |
| nonmonetary exchange (E42) | improved enforcement of trade sanctions (F51) |
| nonmonetary trade (F19) | price discrimination (D40) |
| nonmonetary trade (F19) | market segmentation (M31) |