A Model of Countertrade

Tore Ellingsen

STICERD - Economics of Industry Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: 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.

Keywords: Countertrade; reciprocal buying; two-way transfer of goods; game-theoretic model; rational business strategy; homogeneous goods industries. (search for similar items in EconPapers)
Date: 1991-03
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: A model of countertrade (1991)
Working Paper: A Model of Countertrade (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:stieip:03

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