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The Multinational Firm, Transfer Pricing and the Nature of Competition

Author

Listed:
  • Guttorm Schjelderup
  • Lars Sørgard

Abstract

A multinational firm sets the price that applies to intra-firm trade between the firm´s affiliates at a central level, but delegates decisions about national prices (or quantities) to national affiliates. When these affiliates encounter competition, it is shown that delegation of authority and the nature of competition, changes the role of the transfer price: it is now both a tax saving and a strategic device. Comparative static results develop transfer pricing policies for affiliates encountering Cournot as well as Bertrand competition not previously found in the literature.

Suggested Citation

  • Guttorm Schjelderup & Lars Sørgard, 1995. "The Multinational Firm, Transfer Pricing and the Nature of Competition," CESifo Working Paper Series 95, CESifo.
    • Handle: RePEc:ces:ceswps:_95
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    File URL: https://www.cesifo.org/DocDL/ces_wp95.pdf
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    Cited by:

    1. Peter C. Dawson & Stephen M. Miller, 2000. "Transfer Pricing in the Decentralized Multinational Corporation," Working papers 2000-06, University of Connecticut, Department of Economics.
    2. Peter C. Dawson & Stephen M. Miller, 2009. "International Transfer Pricing for Goods and Intangible Asset Licenses in a Decentralized Multinational Corporation: Review and Extensions," Working Papers 0901, University of Nevada, Las Vegas , Department of Economics.

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