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Strategic Incentives for Keeping One Set of Books in International Transfer Pricing
Author(s) -
Dürr Oliver M.,
Göx Robert F.
Publication year - 2011
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2010.00289.x
Subject(s) - transfer pricing , duopoly , competitor analysis , multinational corporation , incentive , microeconomics , competition (biology) , economics , product (mathematics) , industrial organization , transfer (computing) , set (abstract data type) , product differentiation , business , cournot competition , marketing , finance , parallel computing , computer science , programming language , ecology , geometry , mathematics , biology
We study the equilibrium accounting and transfer pricing policies in a multinational duopoly with price competition in the final product market. We find that the firms in a duopoly can benefit from strategically using the same transfer price for tax and managerial purposes instead of using separate transfer prices for both objectives. According to our results, the practice of one set of books should be the prevalent accounting method in markets with a small number of competitors and similar products.