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Joint Ventures and Transfer Pricing Rivalry

Author

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

Abstract

The paper studies the performance of joint ventures where upstreams firms sell inputs to a production joint venture. It is found that joint ventures lead to overinvoicing of input prices (tranfer prices) compared to integrated firms resulting in lower aggregate profits. Tax and tariff policy may improve the organizational inefficiencies of joint ventures. The analysis suggests that firms must have other reasons for forming joint ventures than those guided by production efficiency and benefits from delegation of decision-making.

Suggested Citation

  • Gabrielsen, T.S. & Schjelderup, G., 1998. "Joint Ventures and Transfer Pricing Rivalry," Papers 10/98, Norwegian School of Economics and Business Administration-.
  • Handle: RePEc:fth:norgee:10/98
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    Keywords

    PRICING ; JOINT VENTURES;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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