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Transfer Pricing as a Strategic Device for Decentralized Multinationals

Author

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  • Guttorm Schjelderup

    (Norwegian School of Economics and Business Administration)

  • Lars Sorgard

    (Norwegian School of Economics and Business Administration)

Abstract

A multinational firm sets the price that applies to intra-firm trade between the firm’s affiliates at a central level, but delegates decisions about national prices (or quantities) to national affiliates. When these affiliates encounter competition it is shown that delegation of authority and the nature of competition changes the role of the transfer price; it now becomes both a tax saving and a strategic device. Comparative static results develop transfer pricing policies for affiliates encountering Cournot as well as Bertrand competition.

Suggested Citation

  • Guttorm Schjelderup & Lars Sorgard, 1997. "Transfer Pricing as a Strategic Device for Decentralized Multinationals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 277-290, July.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:d:10.1023_a:1008612320614
    DOI: 10.1023/A:1008612320614
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