One of the main advantages of delegation is that specific department level information is used. Its main disadvantage is probably that central management looses direct control over certain actions. In this paper we challenge this widely accepted trade-off. We show that delegation might be...

We study the efficiency of the negotiated transfer pricing mechanism proposed by Edlin and Reichelstein (1995) for solving a bilateral holdup problem in a multinational enterprise. Our main finding is that the proposed renegotiation procedure will generally not provide incentives for efficient...

We study the efficiency of negotiated transfer pricing for solving a bilateral hold-up problem in a multinational enterprise. We show that negotiated transfer pricing will generally not provide incentives for an efficient renegotiation of the initial contract and efficient investments because...