A model of countertrade

Tore Ellingsen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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; gametheoretic model; rational business strategy; homogeneous goods industries. (search for similar items in EconPapers)
JEL-codes: J1 L81 (search for similar items in EconPapers)
Pages: 36 pages
Date: 1991-03
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://eprints.lse.ac.uk/6782/ Open access version. (application/pdf)

Related works:
Working Paper: A Model of Countertrade (1991)
Working Paper: A Model of Countertrade (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:6782

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager (lseresearchonline@lse.ac.uk).