Barter's Back! Internet Barter: The Recent Resurgence of an Ancient Practice

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