Countertade is a generic term for parallel business transactions linking sales contracts with agreements to purchase goods or services.Countertrade hs been viewed as an inefficienty way of doing business primarily because of problems associated with such things as qualigy variations and increases in transachtion costs.A review of the international trade interature suggests that market imperfections(shortage of convertible surrency,information saymmetry that may create the so-called lemon problem and moral hazard)may provide motivations for cuntertrade.This article focuses on one motivation:liquidity constraintl.The liquidity constraint is introbuced constraint.The article compares and contrasts two strategies facing the management team of a profit-maximizing firm.The model developed shows that countertrade strategy could be superior to standard money-mediated trade strategy when the liquidity constraint is binding.Thesefore,countertrade appears to be a rational response to conditions that restrict standard trade.As such ,countertrade can supplement standard money-medicated trade and contribute to the growth of international business.
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