Theory recommends various transfer pricing schemes depending on the purpose they are designed for. In contrast, empirical evidence shows the predominance of a single scheme, namely one-step cost-based prices. Our paper concentrates on cost-based transfer, especially focusing on the coordination...

We investigate a transfer pricing problem between two divisions within a decentralized firm. An upstream division produces an intermediate good that is used by another division within the firm and is also sold in an external market, where the firm competes with a rival selling a differentiated...

This paper analyses the optimal accounting and transfer pricing policies of two multinational duopolists facing price competition in the final product market. Our main finding is that firms in industries with a small number of competitors may benefit from using the same transfer price for tax...

This paper examines coordination and profit allocation in a profit-center organization using a single transfer price. The model includes compensations, taxes, and minority interests of two divisions deciding on capacity and sales. The analysis covers arm’s length transfer prices which are...

This paper examines transfer pricing in multinational firms when individual divisions face different income tax rates. Assuming that a firm decouples its internal transfer price from the arm's length price used for tax purposes, we analyze the effectiveness of alternative pricing rules under...

We examine the implementation of efficient decisions about accepting a special order with asymmetric information by means of a dual transfer pricing mechanism based on Ronen and McKinney (1970). The model is designed in a simple fashion, two vertically related divisions within a firm...

This paper compares the performance of alternative cost-based transfer pricing methods. We adopt an incomplete contracting framework with asymmetric information at the trading stage. Transfer pricing guides intra-company trade and provides incentives for value-enhancing specific investments. We...

This study investigates how headquarters involvement affects the efficiency of decentralized transfer price negotiations. Prior research assumes that decentralized managers negotiate transfer prices autonomously. However, evidence suggests that headquarters can become involved in transfer price...