Development of Theoretical Approaches to Transfer Pricing in Supply Chains

The article discusses various options for inter-company interaction in supply chains with vertical links in the implementation of transfer pricing policy. The analysis focuses on the degree of vertical integration of the chain and the problem of choosing the most optimal transfer price when transferring components along the technological chain. The aim of the study is to compare the results of theoretical transfer pricing models for different variants of interaction between participants in supply chains from the perspective of market efficiency and profitability of the participants themselves. The article substantiates the influence of the degree of integration of firms in the chain on achieving higher performance indicators of the entire structure, and the transfer pricing mechanism is considered as a strategy to increase the competitiveness of chain participants. The article provides two ways to set transfer prices depending on the configuration of the chain: at the cost level and at the market price level. It is shown that the overall efficiency of the entire chain will be higher with the integration of participants, when internal prices are determined at the cost level. In case of incomplete integration, the effectiveness of the chain is lower. It has been found that despite the large influence of transfer prices on the market price of the finished product, the strength of this influence decreases as the costs of the focus company approach their maximum level under the specified parameters of the demand function. The methodology of the research is the concept of a vertically integrated structure within the framework of neoclassical theory, economics of industrial markets, supply chain management. The scientific novelty of the study is the development of a methodological framework for the study of transfer pricing policy in supply chains as systems focused on the market demand function, i. e. the activities of all participants in the chain are set up to produce and sell the volume of goods that are in demand. The article proposes a formal model demonstrating the case of partial contracting, which makes it possible to analyze the incentives for choosing a pricing method for the transfer of components, depending on the method of coordinating activities (forward or backward).