Welfare improving barter in imperfect competition
Social Welfare | Barter, Imperfect Competition, Social Welfare | Imperfect Competition | Barter
This paper offers a rationale for the development of the barter industry in industrialized economies. It argues that, in a context of imperfect competition, barter represents a profitable and efficient system of exchange. Thanks to barter, even if already at the optimum, a monopolist can still reduce the production costs and thus increase profits. Moreover, by adopting a barter strategy, he also improves social welfare, as he raises total output and decreases market price. Social welfare improvement is maximum when the monopolist fully satisfies his barter requirements, for which the presence of a well-organized barter market is crucial.