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Negotiated transfer pricing: Theory and implications for value chains in agribusiness

Author

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  • Bodo E. Steiner

    (Department of Rural Economy, Edmonton, Alberta T6G 2H1, Canada)

Abstract

In this article, the author reviews the transfer pricing problem that occurs when trust, the structure of bargaining, relation-specific investment, and complementarities in organizational design affect trading relationships. A literature review focuses on negotiated transfer pricing in the context of both intra- and interfirm transactions. The author analyzes the strategic implications of transfer pricing for organizational design as a result of the imposition of strong informational assumptions without the explicit consideration of the complementary incentives in organizational design. The author review demonstrates that there are practical benefits from addressing these issues, and points to a number of directions for future analysis. [JEL classification: D82, L23, L15, L66] © 2007 Wiley Periodicals, Inc. Agribusiness 23: 279-292, 2007.

Suggested Citation

  • Bodo E. Steiner, 2007. "Negotiated transfer pricing: Theory and implications for value chains in agribusiness," Agribusiness, John Wiley & Sons, Ltd., vol. 23(2), pages 279-292.
    • Handle: RePEc:wly:agribz:v:23:y:2007:i:2:p:279-292
    DOI: 10.1002/agr.20117
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    References listed on IDEAS

    as
    1. Hayenga, Marvin L. & Schrader, Lee F., 1980. "Formula Pricing in Five Commodity Marketing Systems," Staff General Research Papers Archive 11303, Iowa State University, Department of Economics.
    2. Ernst Fehr & Klaus M. Schmidt, "undated". "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
    3. Brent Hueth & Ethan Ligon, 1999. "Producer Price Risk and Quality Measurement," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 512-524.
    4. MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economic Reports 34013, United States Department of Agriculture, Economic Research Service.
    5. Ghosh, Dipankar, 2000. "Complementary arrangements of organizational factors and outcomes of negotiated transfer price," Accounting, Organizations and Society, Elsevier, vol. 25(7), pages 661-682, October.
    6. Ernst Fehr & Klaus Schmidt, 2004. "Contracts, Fairness and Incentives," Levine's Bibliography 122247000000000148, UCLA Department of Economics.
    7. Steiner, Bodo, 2006. "Governance Reform of German food safety regulation: Cosmetic or real?," MPRA Paper 26252, University Library of Munich, Germany.
    8. Marvin L. Hayenga & Lee F. Schrader, 1980. "Formula Pricing in Five Commodity Marketing Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 753-759.
    9. Schroeter, John R. & Azzam, Azzeddine M. & Zhang, Mingxia, 2000. "Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef," Staff General Research Papers Archive 1777, Iowa State University, Department of Economics.
    10. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    11. John R. Schroeter & Azzeddine M. Azzam, & Mingxia Zhang, 2000. "Measuring Market Power in Bilateral Oligopoly: The Wholesale Market for Beef," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 526-547, January.
    12. Hueth Brent & Marcoul Philippe, 2003. "An Essay on Cooperative Bargaining in U.S. Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-15, March.
    13. Ramon Casadesus‐Masanell, 2004. "Trust in Agency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 375-404, September.
    14. Eckel, Catherine C. & Wilson, Rick K., 2004. "Is trust a risky decision?," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 447-465, December.
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    Cited by:

    1. Steiner, Bodo E., 2007. "Formal beef alliances and alignment challenges: issues in contracting, pricing and quality," Project Report Series 7709, University of Alberta, Department of Resource Economics and Environmental Sociology.
    2. Steiner, Bodo E. & Lan, Kevin & Unterschultz, James R. & Boxall, Peter C. & Laate, Emmanuel & Yang, Danyi, 2012. "Producer preferences towards vertical coordination: The case of Canadian beef alliances," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122441, European Association of Agricultural Economists.
    3. Bodo E. Steiner, 2017. "A phenomenon-driven approach to the study of value creation and organizational design issues in agri-business value chains," Economia agro-alimentare, FrancoAngeli Editore, vol. 19(1), pages 89-118.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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