A game-theoretic approach to transfer pricing in a vertically integrated supply chain

Edward C. Rosenthal

International Journal of Production Economics, 2008, vol. 115, issue 2, 542-552

Abstract: We study the problem of setting transfer prices in a vertically integrated supply chain, in which the divisions share technology and transactions costs. We develop a cooperative game that provides transfer prices for the intermediate products in the supply chain. This model is applied both when the market prices for these products are known and also when their valuations differ. We provide a solution that is fair and acceptable to all divisions. In the perfect information case, the Shapley value generates the transfer prices, while in the asymmetric case we obtain transfer prices from the solution to a linear program.

Keywords: Transfer; prices; Supply; chain; management; Cooperative; game; theory (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925-5273(08)00214-4
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:115:y:2008:i:2:p:542-552

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().