FORMULA APPORTIONMENT AND TRANSFER PRICING UNDER OLIGOPOLISTIC COMPETITION

Søren Bo Nielsen, Pascalis Raimondos-Møller () and Guttorm Schjederup
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Søren Bo Nielsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Guttorm Schjederup: Norwegian School of Economics and Business Administration, Postal: Norwegian School of Economics and Business Administration, CESifo, Helleveien 30, N-5045 Bergen, Norway
Authors registered in the RePEc Author Service: Guttorm Schjelderup ()

No 18-2000, Working Papers from Copenhagen Business School, Department of Economics

Abstract: This paper demonstrates that under conditions of imperfect (oligopolistic) competition, a transition from separate accounting (SA) to formula apportionment (FA) does not eliminate the problem of profit shifting via transfer pricing. In particular, if affiliates of a multination firm face oligopolistic competition, it is beneficial for the multinational to manipulate transfer prices for tax-saving as well as strategic reasons under both FA and SA. The analysis shows that a switch from SA rules to FA rules may actually strengthen profit shifting activities by multinationals.

Keywords: Formula apportionment; Transfer pricing; Oligopolistic competition (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2000-10-01

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Related works:
Working Paper: Formula Apportionment and Transfer Pricing under Oligopolistic Competition
Working Paper: Formula Apportionment and Transfer Pricing under Oligopolistic Competition (2001)
Journal Article: Formula Apportionment and Transfer Pricing under Oligopolistic Competition (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:cbsnow:2000_018

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