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Transfer Pricing and Ownership Structure

Author

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  • Tommy Staahl Gabrielsen
  • Guttorm Schjelderup

Abstract

We study the performance of jointly owned production units where upstream firms sell inputs to a downstream final market producer. It is found that, compared to integrated firms, co‐ownership leads to overinvoicing of input prices (transfer prices), resulting in lower aggregate profits. Tax and tariff policy may lessen the organizational inefficiencies of jointly owned firms. The analysis suggests that firms must have other reasons for forming jointly owned production units than those guided by production efficiency and benefits from delegation of decision‐making. JEL classification: F23; L23

Suggested Citation

  • Tommy Staahl Gabrielsen & Guttorm Schjelderup, 1999. "Transfer Pricing and Ownership Structure," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 673-688, December.
    • Handle: RePEc:bla:scandj:v:101:y:1999:i:4:p:673-688
    DOI: 10.1111/1467-9442.00179
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    Cited by:

    1. Rosenthal, Edward C., 2008. "A game-theoretic approach to transfer pricing in a vertically integrated supply chain," International Journal of Production Economics, Elsevier, vol. 115(2), pages 542-552, October.
    2. Changwen Li & Bin Cao & Yong-Wu Zhou & T. C. Edwin Cheng, 2023. "Pricing, coalition stability, and profit allocation in the pull assembly supply chains under competition," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(3), pages 977-1011, September.
    3. Kind, Hans Jarle & Midelfart, Karen Helene & Schjelderup, Guttorm, 2005. "Corporate tax systems, multinational enterprises, and economic integration," Journal of International Economics, Elsevier, vol. 65(2), pages 507-521, March.
    4. Tran Quoc H. & Croson Rachel T. A. & Seldon Barry J., 2016. "Experimental Evidence on Transfer Pricing," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 50(1), pages 27-48, June.
    5. repec:otg:wpaper:1403 is not listed on IDEAS
    6. Chen, Zhiqi & Ross, Thomas W., 2003. "Cooperating upstream while competing downstream: a theory of input joint ventures," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 381-397, March.
    7. Erickson, Gary M., 2012. "Transfer pricing in a dynamic marketing-operations interface," European Journal of Operational Research, Elsevier, vol. 216(2), pages 326-333.
    8. Schjelderup, Guttorm & Ulltveit-Moe, Karen Helene & Kind, Hans Jarle, 2001. "Corporate Taxation, Multinational Enterprise and Economic Integration," CEPR Discussion Papers 2753, C.E.P.R. Discussion Papers.
    9. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo.
    10. Liu, Guowei & Zhang, Jianxiong & Tang, Wansheng, 2015. "Strategic transfer pricing in a marketing–operations interface with quality level and advertising dependent goodwill," Omega, Elsevier, vol. 56(C), pages 1-15.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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