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Transfer Pricing as a Strategic Device for Decentralized Multinationals

  • Guttorm Schjelderup
  • Lars Sorgard

A multinational firm sets the price that applies tointra-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 competitionit is shown that delegation of authority and the nature of competitionchanges the role of the transfer price; it now becomes both atax saving and a strategic device. Comparative static resultsdevelop transfer pricing policies for affiliates encounteringCournot as well as Bertrand competition. Copyright Kluwer Academic Publishers 1997

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File URL: http://hdl.handle.net/10.1023/A:1008612320614
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 3 (July)
Pages: 277-290

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:277-290
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  1. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
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  4. Katz, Michael L., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Department of Economics, Working Paper Series qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  7. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier.
  8. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  9. L. W. Copithorne, 1971. "International Corporate Transfer Prices and Government Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 4(3), pages 324-41, August.
  10. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  12. James A. Brander, 1995. "Strategic Trade Policy," NBER Working Papers 5020, National Bureau of Economic Research, Inc.
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