The Arm’s Length Principle and Tacit Collusion
The arm’s length principle states that the transfer price between two associated enterprises should be the price that would be paid for similar goods in similar circumstances by unrelated parties dealing at arm’s length with each other. This paper examines the effect of the arm’s length principle on dynamic competition in imperfectly competitive markets. It is shown that the arm’s length principle renders tacit collusion more stable. This is true whether firms have exclusive dealings with unrelated parties or compete for the demand from unrelated parties.
|Date of creation:||Mar 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Monash University, Victoria 3800, Australia|
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC
|Order Information:|| Web: http://www.buseco.monash.edu.au/eco/research/papers/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- L. Lambertini & S. Poddar & D. Sasaki, 1997.
"Standardization and the Stability of Collusion,"
298, Dipartimento Scienze Economiche, Universita' di Bologna.
- Luca Lambertini & Sougata Poddar & Dan Sasaki, 1997. "Standardization and the Stability of Collusion," CIE Discussion Papers 1997-14, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- LAMBERTINI, Luca & PODDAR, Sougata & SASAKI, Dan, . "Standardization and the stability of collusion," CORE Discussion Papers RP 1325, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Michael Alles & Srikant Datar, 1998. "Strategic Transfer Pricing," Management Science, INFORMS, vol. 44(4), pages 451-461, April.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
- Goolsbee, Austan & Maydew, Edward L., 2000.
"Coveting thy neighbor's manufacturing: the dilemma of state income apportionment,"
Journal of Public Economics,
Elsevier, vol. 75(1), pages 125-143, January.
- Austan Goolsbee & Edward L Maydew, 1998. "Coveting Thy Neighbor's Manuafacturing: The Dilemma of State Income Apportionment," NBER Working Papers 6614, National Bureau of Economic Research, Inc.
- Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
- Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
- Kristian Behrens & Susana Peralt & Pierre M. Picard, 2014.
"Transfer Pricing Rules, OECD Guidelines, and Market Distortions,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 16(4), pages 650-680, 08.
- BEHRENS, Kristian & PERALTA, Susana & PICARD, Pierre, 2009. "Transfer pricing rules, OECD guidelines, and market distortions," CORE Discussion Papers 2009067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kristian Behrens & Susana Peralta & Pierre M. Picard, 2010. "Transfer pricing rules, OECD guidelines, and market distortions," CREA Discussion Paper Series 10-20, Center for Research in Economic Analysis, University of Luxembourg.
- Kristian Behrens & Susana Peralta & Pierre M. Picard, 2009. "Transfer Pricing Rules, OECD Guidelines, and Market Distortions," Cahiers de recherche 0943, CIRPEE.
- Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June.
- Christian Keuschnigg & Michael P. Devereux, 2009.
"The Distorting Arm's Length Principle,"
University of St. Gallen Department of Economics working paper series 2009
2009-20, Department of Economics, University of St. Gallen.
- Michael P. Devereux & Christian Keuschnigg, 2009. "The Distorting Arm’s Length Principle," Working Papers 0910, Oxford University Centre for Business Taxation.
- Devereux, Michael P. & Keuschnigg, Christian, 2009. "The Distorting Arm's Length Principle," CEPR Discussion Papers 7375, C.E.P.R. Discussion Papers.
- Gordon, Roger H & Wilson, John Douglas, 1986. "An Examination of Multijurisdictional Corporate Income Taxation under Formula Apportionment," Econometrica, Econometric Society, vol. 54(6), pages 1357-73, November.
- Tim Baldenius & Stefan Reichelstein, 2006. "External and Internal Pricing in Multidivisional Firms," Journal of Accounting Research, Wiley Blackwell, vol. 44(1), pages 1-28, 03.
- Kant, Chander, 1990. "Multinational firms and government revenues," Journal of Public Economics, Elsevier, vol. 42(2), pages 135-147, July.
- Chongwoo Choe & Charles E. Hyde, 2007. "Multinational Transfer Pricing, Tax Arbitrage and the Arm's Length Principle," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 398-404, December.
- Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
- Charles E. Hyde & Chongwoo Choe, 2005. "Keeping Two Sets of Books: The Relationship Between Tax and Incentive Transfer Prices," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 165-186, 03.
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- Laixun Zhao, 2000. "Decentralization and Transfer Pricing Under Oligopoly," Southern Economic Journal, Southern Economic Association, vol. 67(2), pages 414-426, July.
- Anil Arya & Brian Mittendorf & Dae-Hee Yoon, 2008. "Friction in Related-Party Trade When a Rival Is Also a Customer," Management Science, INFORMS, vol. 54(11), pages 1850-1860, November.
- Holmstrom, Bengt & Tirole, Jean, 1991. "Transfer Pricing and Organizational Form," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 201-28, Fall.
- Anil Arya & Brian Mittendorf, 2008. "Pricing Internal Trade to Get a Leg up on External Rivals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 709-731, 09.
- Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
- Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2012-02. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus)
If references are entirely missing, you can add them using this form.