We study the role of peer groups in determining the structure and the total amount of executive compensation. Our analysis is based on a standard agency model in which the agent's reservation utility is related to the peer group used for performance evaluation. Our main result is that the...

This chapter reviews the recent economic literature on transfer pricing. As a starting point, we take Hirshleifer's transfer pricing model and discuss the basic structure of the most widely used model extensions. We review transfer pricing models with asymmetric information, transfer pricing...

I study the economic consequences of tax deductibility limits on salaries for the design of incentive contracts. The analysis is based on a simple agency model in which the firm's cash flow is a function of the agent's effort and an observable random factor beyond the agent's control. According...

This paper analyzes the impact of capacity costs on bidding strategies of firms participating in procurement auctions. More efficient firms will invest in advance due to their high probability of winning the auction while less efficient bidders prefer to wait with their investments until the...

This paper analyzes strategic transfer pricing with risk and effort averse divisional managers. In contrast to earlier literature, we find that the existence of a standard agency problem allows transfer pricing to serve as a commitment device even if the transfer prices are not mutually...

This paper analyzes the use of transfer pricing as a strategic device in divisionalized firms facing duopolistic price competition. When transfer prices are observable, both firms headquarters will charge a transfer price above the marginal cost of the intermediate product to induce their...

This paper analyzes the impact of capacity costs on bidding strategies of firms participating in procurement auctions. More efficient firms will invest in advance due to their high probability of winning the auction while less efficient bidders prefer to wait with their investments until the...