The double marginalization problem of transfer pricing: Theory and experiment

Björn Lantz

European Journal of Operational Research, 2009, vol. 196, issue 2, 434-439

Abstract: In this paper, we find that the idea of using optional two-part tariffs as a basis for tariff renegotiations in a bilaterally monopoly setting is a solution to the double marginalization problem that theoretically (1) creates a stable equilibrium, (2) at the overall efficient level, (3) without the presence of a central management. Through experimental testing, we find that the efficiency of this mechanism is significantly higher than the efficiency of simple direct negotiation, both under symmetrically and asymmetrically distributed information.

Keywords: Pricing; Transfer; pricing; Experiment (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:196:y:2009:i:2:p:434-439

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