Bartering occurs when two or more parties – such as individuals, businesses and nations – exchange goods or services evenly without the use of a monetary medium. While a barter economy is considered more primitive than modern economies, barter transactions still regularly transpire in the marketplace.
Below are three basic examples of bartering for goods and services, along with a common contemporary barter exchange.
1. Bartering with Consumer Goods
In its simplest form, bartering is the exchange of one valuable product for another between two individuals. Person A has two chickens but wants to get some apples; meanwhile, Person B has a bushel of apples but wants some chickens. If the two can find each other, Person A might trade one of his chickens for a half-bushel of Person B's apples. No medium of exchange is used.
The problem posed by simple bartering is what economists call the "double coincidence of wants." In this case, Person A is not satisfied unless he crosses paths with a chicken-wanting apple-carrier, while Person B needs an apple-wanting chicken-carrier.
2. Bartering with Consumer Services
Bartering can also take place as an exchange for services. Services are salable acts, such as performing mechanical work or providing legal representation. If one professional agrees to perform tax accounting for another professional in exchange for cleaning services, this is a barter transaction.
Much like with consumer goods, a barter transaction involving consumer services has demand and supply limitations.
3. Modern Advertising Services
The most common form of business-to-business bartering in modern economies involves the trading of advertising rights.
In these cases, one company sells its available ad space to another company in exchange for the right to advertise on the second company's space. These can be for television rights, internet advertisements, radio rights, actual billboards or various other types of media.