Abstract:
Founded in 1991 in Australia by Wayne Sharpe, Bartercard International had offices in Australia, Thailand, Malaysia, New Zealand, Hong Kong, Lebanon, Sri Lanka, Canada, and the UK. By its own estimates, Bartercard International was the world's largest trade exchange by volume of trade turnover. The company established Bartercard UK in 1996. Like all Bartercard exchanges, Bartercard UK operated on a membership basis, and its target market was small businesses. By 1999 (the year in which this case is set) Bartercard UK's membership had grown to include 793 businesses. The exchange had its own currency, the "Trade pound" (TGBP), which held the same value as the UK pound (GBP), but was not directly convertible. Through the exchange, members used TGBPs to buy and sell goods and services. Members could go into debt with the exchange in TGBPs, up to a pre-determined credit limit with no interest charge. Users paid a membership fee to join the exchange, and a 6% transaction fee on each purchase or sale. Fees were payable in GBPs. The premise was that members had spare capacity with which to provide goods and services at a marginal cost, but were paid regular prices (presumably the average cost) in TGBPs. Bartercard sought to promote this idea, demonstrating the ways in which trading reduced the cost of members' supplies and extended the market for their goods or services.
Learning Objective:
The case raises questions about the role that an exchange, with its own currency, plays as a lender and developer of business networks. Does it have the potential to promote local economic development through these two roles? More broadly, the case encourages a discussion of the institutional foundations of money, and the difference between marginal and average cost. A teaching note is available for this case (1670.2).
