Profit-shifting in Two-sided Markets
AbstractWe 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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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2009/1.
Length: 13 pages
Date of creation: 14 Apr 2009
Date of revision:
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More information through EDIRC
Multinational enterprises; two-sided markets; profit shifting;
Other versions of this item:
- Dirk Schindler & Guttorm Schjelderup, 2010. "Profit Shifting in Two-Sided Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(3), pages 373-383.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-18 (All new papers)
- NEP-BEC-2009-04-18 (Business Economics)
- NEP-MIC-2009-04-18 (Microeconomics)
- NEP-MKT-2009-04-18 (Marketing)
- NEP-NET-2009-04-18 (Network Economics)
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.:
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