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...

Cost-based transfer pricing is used by many firms. However, there exist many cost-based methods that may be centralized or decentralized. If centralized, the firm's central office has discretion how accurately to measure the divisions' costs. In order to measure cost reliably, the firm must...

We investigate how the organizational structure of a firm influences the decision making of its top management. Different organizational structures lead information to be processed in different ways by the individual decision makers, potentially creating an informational cascade within the...