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HOW TO HAGGLE and TO STAY FIRM: BARTER AS HIDDEN PRICE DISCRIMINATION
Author(s) -
Magenheim Ellen,
Murrell Peter
Publication year - 1988
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1988.tb01507.x
Subject(s) - barter , economics , value (mathematics) , database transaction , microeconomics , price discrimination , transaction cost , monetary economics , market economy , machine learning , computer science , programming language
Barter transactions, conducted openly by established corporations, play an increasingly significant role in the U.S. economy. The model developed here helps explain why firms use barter and yields predictions concerning the circumstances under which barter is likely to occur. It is shown that when two firms barter goods used as inputs, price discrimination occurs. This price discrimination is hidden from the firms' other customers because the real values of the transacted goods to the barterers are different from the accounting prices used in the transaction. Since price discrimination that is observed by potential customers might have an adverse effect on the selling firm's future bargaining power, barter will have value as a means of hiding price discrimination.