aktuelle Publikationen (ab 2015)

Dual transfer pricing with internal and external trade

Author(s)
Edward Johnson, Nicole Bastian Johnson, Thomas Pfeiffer
Abstract

This paper examines a transfer pricing problem between two divisions of a decentralized firm. The selling division is privately informed about its own costs and produces a good that is sold both externally in an intermediate market and internally within the firm. Unlike most previous work, we focus on dual transfer pricing systems that allow the selling division to be credited for an amount that differs from the amount charged to the buying division. We identify conditions under which efficient decentralized trade and external price setting incentives can be provided with a properly chosen set of dual transfer prices that do not rely on direct communication. Instead, the optimal dual transfer prices will depend only on public information about the market price charged by the upstream division in the external market, which indirectly communicates information about production costs to the downstream division. For a variety of well-known demand functions, the optimal transfer prices will be linear functions of the market price. Our main results hold when the upstream division faces multiple internal buyers or faces a binding capacity constraint.

Organisation(s)
Department of Accounting, Innovation and Strategy
External organisation(s)
University of Oregon
Journal
Review of Accounting Studies
Volume
21
Pages
140–164
No. of pages
25
ISSN
1380-6653
DOI
https://doi.org/10.1007/s11142-015-9343-x
Publication date
2016
Peer reviewed
Yes
Austrian Fields of Science 2012
502006 Controlling
Keywords
Portal url
https://ucris.univie.ac.at/portal/en/publications/dual-transfer-pricing-with-internal-and-external-trade(20805be0-5787-4378-b448-0eecec1eba34).html