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Profit-shifting in Two-sided Markets

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Author Info
Schindler, Dirk () (Universität Konstanz)
Schjelderup, Guttorm () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

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Abstract

We investigate how multinational two-sided platform firms set their prices on intra firm transactions. Two-sided platform firms derive income from two customer groups that are connected through at least one positive network externality from one group to the other. A main finding is that even in the absence of taxation transfer prices deviate from marginal cost of production. A second result of the paper is that it is inherently difficult to establish arm's length prices in two-sided markets. Finally, we find that differences in national tax rates may be welfare enhancing despite the use of such prices as a profit shifting device.

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Publisher Info
Paper provided by Department of Finance and Management Science, Norwegian School of Economics and Business Administration in its series Discussion Papers with number 2009/1.

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Length: 13 pages
Date of creation: 14 Apr 2009
Date of revision:
Handle: RePEc:hhs:nhhfms:2009_001

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Postal: NHH, Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
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Related research
Keywords: Multinational enterprises; two-sided markets; profit shifting;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2008. "Efficiency Enhancing Taxation in Two-sided Markets," Discussion Papers 2008/1, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
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  2. Jack Hirshleifer, 1956. "On the Economics of Transfer Pricing," Journal of Business, University of Chicago Press, vol. 29, pages 172. [Downloadable!]
  3. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February. [Downloadable!]
  4. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  5. James R. Hines, Jr. & Eric M. Rice, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," NBER Working Papers 3477, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-11-26.

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