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Pricing Internal Trade to Get a Leg up on External Rivals

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Author Info

  • Anil Arya
  • Brian Mittendorf

Abstract

"The pricing of transfers from parent to subsidiary is an oft-explored issue. Linking the cost of internal transfers with external market prices is one common approach, typically justified when the market for the good is perfectly competitive. This paper shows that imperfect competition may also justify market-based transfer prices. Concern that transfer price will deviate from marginal cost and thereby distort subsidiary choices can lead a parent to undertake actions to influence the market price of the upstream good. Such efforts can provide a desirable strategic posture in the upstream market." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 3 (09)
Pages: 709-731

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Handle: RePEc:bla:jemstr:v:17:y:2008:i:3:p:709-731

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Choe, Chongwoo & Matsushima, Noriaki, 2011. "The Arm's Length Principle and Tacit Collusion," MPRA Paper 37295, University Library of Munich, Germany, revised 12 Mar 2012.
  2. Ana B. Lemus, 2011. "Strategic incentives for kepping one set of books under the Arm's Length Principle," Economics Working Papers we1135, Universidad Carlos III, Departamento de Economía.
  3. A. Lemus & Diego Moreno, 2011. "The non-neutrality of the arm's length principle with imperfect competition," Economics Working Papers we1134, Universidad Carlos III, Departamento de Economía.
  4. Nathan Berg & Chun-Yu Chen & Barry J. Seldon, 2014. "Strategic Transfer Pricing and Intensity of Competition," Working Papers 1403, University of Otago, Department of Economics, revised Mar 2014.

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