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 investigates the relationship between a firm's cost stability and the frequency with which it acquires data in planning its operations. We first consider a benchmark model of a profit maximizing monopolist whose marginal costs follow an AR(1) process over time. The firm uses forecasts...

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 exclude their marketing division from the external input market and charge a transfer price above...

This paper compares the performance of transfer pricing and tidy cost allocations in a multiproduct firm in presence of output market competition and production externalities. In absence of competition, tidy cost allocations are creating inefficient allocations within the firm while transfer...

This paper shows that in a model of managerial delegation in duopoly market structure, if the managers' salary varies with the incentive schemes offered by the owners, then the well-known results of equilibrium incentive scheme (by Fershtman and Judd, 1987, A.E.R.) get modified. In case of...

This paper contributes to the literature on market efficiency and stock return predictability as well as the use of financial information in setting expectations in the market. I provide evidence regarding a joint test of accounting information and the descriptive validity of the behavioral...

We model career concerns in a regime where a linear incentive contract includes a mix of a publicly observed performance measure and a second, correlated, private measure that is not observed by the labor market. Under this quot;mixquot; regime, we find that agent effort and total agency payoff...

This study reports the results of three experiments that examine how preferences for wealth and honesty affect managerial reporting. We find that subjects often sacrifice wealth to make honest or partially honest reports, and they generally do not lie more as the payoff to lying increases. We...

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...