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Optimal Negotiated Transfer Pricing and Its Implications for International Transfer Pricing of Intangibles


Author Info

  • Peter C. Dawson

    (Dallas, Texas)

  • Stephen M. Miller

    (University of Connecticut and University of Nevada, Las Vegas)


Intangibles exhibit zero marginal licensing cost, including cross-border intra-firm licensing of intangibles within a MNC. A MNC may not realize the full profit potential of licensing intangibles intra-firm, however, under suboptimal negotiated transfer pricing schemes. Our negotiated transfer pricing bargaining structure unlocks this potential by producing an optimal transfer price and larger optimal intra-firm licensed quantity. Increased licensing of intangibles intra-firm across borders produces a greater potential tax savings/consolidated after-tax profit gain per unit of transfer price adjustment, creating a context where MNCs feel a greater imperative or incentive to move beyond legal tax avoidance toward evasion.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2009-06.

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Length: 58 pages
Date of creation: Jan 2009
Date of revision: Dec 2010
Publication status: Published in International Journal of Intellectual Property Management, 4(4) 2011
Handle: RePEc:uct:uconnp:2009-06

Note: Published in revised form as: Dawson, P.C. and Miller, S.M. (2011) ‘Optimal negotiated transfer pricing and its implications for international transfer pricing of intangibles’, Int. J. Intellectual Property Management, Vol. 4, No. 4, pp.239–269
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
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Related research

Keywords: Negotiated transfer pricing; licensing intangibles; arm’s length royalty; decentralized decision-making; multinational corporations; international trade; intra-firm trade;

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