Discussion paper

DP2449 Barter For Price Discrimination?

Unprecedented growth of barter is a striking phenomenon of Russia’s transition. The explanations of barter include tight monetary policy, tax evasion and poor financial inter-mediation. We show that the market power may also be important. We build a model of imperfect competition in which firms use barter for price discrimination. The model predicts a positive relationship between the concentration of market power and the share of barter in sales. We also show that barter disappears at a certain level of competition. The model has multiple stable equilibria which may explain persistence of barter. Using a unique data set on barter transactions in Russia, we show that empirical evidence is consistent with the model’s predictions.

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Citation

Guriev, S and D Kvasov (2000), ‘DP2449 Barter For Price Discrimination?‘, CEPR Discussion Paper No. 2449. CEPR Press, Paris & London. https://cepr.org/publications/dp2449