Mitch and Cam needed a wedding videographer and Phil knows just the person to help. At an early stage in his life, Phil helped a friend with an infomercial he was filming and decided to reach out to the friend to pay him back as a wedding videographer. The concept of barter stems from the notion of double coincidence of wants. The videographer wanted someone to stand in for the infomercial and Phil wanted a favor down the line. Bartering is tough because the items at stake may not be able to be paid immediately or the exchange may be complicated. Traditionally, money is exchanged in the process, but Phil and his friend opted for a favor.
See more: barter, double coincidence of wants, exchange, services, trade
Luke is baby-sitting for Gloria. She expects him to care for her son in a responsible way. When Luke posts a selfie on social media, Gloria worries that her son might be in danger. This represents the principal-agent problem. Luke is the agent and Gloria is the principal. Is he acting in her best interest? Of course not! He’s shirking. To cover up his shirking, Luke tells Gloria that he has a series of photographs of her son in dangerous situation but they’re all fake. Now, he needs a series of photoshopped pictures but doesn’t use photoshop. So, he decides to only give Manny something that he wants if he photoshops Gloria’s younger son in to dangerous situations. This represents trade through barter. Luke has a pass that Manny wants. Manny has a skill that Luke needs. They trade because they have a double coincidence of wants.
See more: barter, double coincidence of wants, exchange, labor, moral hazard, network externalities, principle agent problem, social media, trade