Transfer Pricing as a Strategic Device for Decentralized Multinationals

Guttorm Schjelderup and Lars Sørgard

International Tax and Public Finance, 1997, vol. 4, issue 3, 277-290

Abstract: A multinational firm sets the price that applies tointra-firm trade between the firm's affiliates at a central level,but delegates decisions about national prices (or quantities)to national affiliates. When these affiliates encounter competitionit is shown that delegation of authority and the nature of competitionchanges the role of the transfer price; it now becomes both atax saving and a strategic device. Comparative static resultsdevelop transfer pricing policies for affiliates encounteringCournot as well as Bertrand competition. Copyright Kluwer Academic Publishers 1997

Date: 1997
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DOI: 10.1023/A:1008612320614

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