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Case
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Reference no. HKS1670.0
Published by: Harvard Kennedy School
Published in: 2002
Length: 15 pages
Notes: For terms & conditions go to www.thecasecentre.org/freecaseterms

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 reckoning, Bartercard International was the world''s largest trade exchange by volume of trade turnover. It was also profitable. It established Bartercard UK in 1996. Like all other Bartercard exchanges, Bartercard UK operated on a membership basis. Its target market was small businesses. In 1999 (the year in which the case is set) Bartercard UK''s membership was 793 businesses. The exchange had its own currency, the ''Trade pound'' (T£ ), which had the same value as the UK pound (£), but one was not directly convertible into the other. Members bought and sold goods and services from each other in T£s through the exchange, and could go into debt with the exchange in T£s up to a pre-determined credit limit with no interest charge. Members paid a membership fee to join the exchange and a 6% transaction fee on each purchase and sale. The fees were payable in £s. The exchange was premised on the fact that its members had spare capacity with which they could produce goods and provide services at marginal cost, but get paid their regular price (presumably average cost) in T£s. Bartercard promoted membership on the exchange based on this premise, and sought to demonstrate to clients the ways in which trading on the exchange could save them money on the purchase of their supplies and extend the market for their goods or services. The case raises questions about the role that an exchange with its own currency plays as a lender and as a developer of business networks. Does it have the potential to promote local economic development through these two roles? More broadly the case provides the basis for a discussion of the institutional foundations of money, and the difference between marginal and average cost.

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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 reckoning, Bartercard International was the world''s largest trade exchange by volume of trade turnover. It was also profitable. It established Bartercard UK in 1996. Like all other Bartercard exchanges, Bartercard UK operated on a membership basis. Its target market was small businesses. In 1999 (the year in which the case is set) Bartercard UK''s membership was 793 businesses. The exchange had its own currency, the ''Trade pound'' (T£ ), which had the same value as the UK pound (£), but one was not directly convertible into the other. Members bought and sold goods and services from each other in T£s through the exchange, and could go into debt with the exchange in T£s up to a pre-determined credit limit with no interest charge. Members paid a membership fee to join the exchange and a 6% transaction fee on each purchase and sale. The fees were payable in £s. The exchange was premised on the fact that its members had spare capacity with which they could produce goods and provide services at marginal cost, but get paid their regular price (presumably average cost) in T£s. Bartercard promoted membership on the exchange based on this premise, and sought to demonstrate to clients the ways in which trading on the exchange could save them money on the purchase of their supplies and extend the market for their goods or services. The case raises questions about the role that an exchange with its own currency plays as a lender and as a developer of business networks. Does it have the potential to promote local economic development through these two roles? More broadly the case provides the basis for a discussion of the institutional foundations of money, and the difference between marginal and average cost.

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