Profit-shifting in Two-sided Markets

Dirk Schindler and Guttorm Schjelderup

No 2009/1, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: We investigate how multinational two-sided platform firms set their prices on intra firm transactions. Two-sided platform firms derive income from two customer groups that are connected through at least one positive network externality from one group to the other. A main finding is that even in the absence of taxation transfer prices deviate from marginal cost of production. A second result of the paper is that it is inherently difficult to establish arm's length prices in two-sided markets. Finally, we find that differences in national tax rates may be welfare enhancing despite the use of such prices as a profit shifting device.

Keywords: Multinational enterprises; two-sided markets; profit shifting (search for similar items in EconPapers)
JEL-codes: D21 L24 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2009-04-14
New Economics Papers: this item is included in nep-bec, nep-mic, nep-mkt and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Profit Shifting in Two-Sided Markets (2010)
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