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Transfer Pricing and Ownership Structure

Author

Listed:
  • Gabrielsen, T.S.
  • Schjelderup, G.

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.

Suggested Citation

  • Gabrielsen, T.S. & Schjelderup, G., 1999. "Transfer Pricing and Ownership Structure," Norway; Department of Economics, University of Bergen 202, Department of Economics, University of Bergen.
  • Handle: RePEc:fth:bereco:202
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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. Tran Quoc H. & Croson Rachel T. A. & Seldon Barry J., 2016. "Experimental Evidence on Transfer Pricing," International Journal of Management and Economics, De Gruyter Open, vol. 50(1), pages 27-48, June.
    3. Erickson, Gary M., 2012. "Transfer pricing in a dynamic marketing-operations interface," European Journal of Operational Research, Elsevier, vol. 216(2), pages 326-333.
    4. 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.
    5. 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.
    6. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
    7. repec:otg:wpaper:1403 is not listed on IDEAS
    8. Kind, Hans Jarle & Schjelderup, Guttorm & Ulltveit-Moe, Karen-Helene, 2001. "Corporate Taxation, Multinational Enterprise and Economic Integration," CEPR Discussion Papers 2753, C.E.P.R. Discussion Papers.
    9. 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

    Keywords

    PRICES ; INTERNATIONAL AFFAIRS ; OWNERSHIP;

    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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