A barter transaction allows for two parties to exchange goods or services without using money. Direct barterrnis often referred to as the “double coincidence of wants” and requires that each of the two parties involved inrnthe transaction each have a good satisfying a specific need of the other party. This results in high transactionrncosts, primarily associated with the search to find the “double coincidence” necessary for a direct barterrntransaction. There is an additional cost due to the uncertainty of the value of the goods traded. This cost isrnprimary associated with the need for the receiving party to use the traded good or to trade it in anotherrntransaction. Indirect barter uses an intermediary good in the exchange, such as a trade token. The prevalencernof barter is expected to be limited due to high transaction costs because the time and effort involved in therntransactions would be costly. However, the use of barter appears to be increasingly on the rise. A majorrncontributing factor to this growth is the use of existing and emerging electronic commerce technologies, suchrnas search engines and transaction processing systems, that may be used over a global network of hundreds ofrnmillions of users. This paper gives an overview to barter, gives some examples of Internet-based barter net-works,rnand introduces likely characteristics of electronic based barter market mechanisms. Future researchrnin this area will include economic modeling of electronic commerce based barter systems and the explicitrndesign of online barter market mechanisms.
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