Abstract

http://ssrn.com/abstract=921379
 
 

References (40)



 
 

Citations (2)



 


 



Decentralization, Transfer Pricing and Tacit Collusion


Mikhael Shor


University of Connecticut Department of Economics

Hui Chen


University of Colorado at Boulder

June 1, 2006

Contemporary Accounting Research (2009, Vol. 26, No. 2, pp. 581-604)

Abstract:     
Research in accounting traditionally regards transfer pricing as an intra-firm transaction problem. Within the context of a simple Cournot model, we demonstrate that firms can use transfer prices strategically as a collusive device. While firms are individually better off from a centralized organizational form with each internal division transferring intermediate goods at marginal cost, all firms benefit from a collusive agreement to organize along profit centers, transferring goods above marginal cost. This collusion yields roughly twice the competitive profits and is sustainable even when price or quantity collusion is not. This practice may also escape legal scrutiny while the same cost-shifting between regulated monopolists and their corporate affiliates is regarded as a major concern for regulators and researchers.

Number of Pages in PDF File: 21

Keywords: transfer pricing, collusion, strategic delegation, vertical integration

JEL Classification: K21, M41

Accepted Paper Series


Download This Paper

Date posted: July 31, 2006 ; Last revised: October 4, 2012

Suggested Citation

Shor, Mikhael and Chen, Hui, Decentralization, Transfer Pricing and Tacit Collusion (June 1, 2006). Contemporary Accounting Research (2009, Vol. 26, No. 2, pp. 581-604) . Available at SSRN: http://ssrn.com/abstract=921379 or http://dx.doi.org/10.2139/ssrn.921379

Contact Information

Mikhael Shor
University of Connecticut Department of Economics ( email )
341 Mansfield Road
Storrs, CT 06269
United States
HOME PAGE: http://www.mikeshor.com/
Hui Chen (Contact Author)
University of Colorado at Boulder ( email )
Leeds School of Business
Boulder, CO 80309
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,453
Downloads: 812
Download Rank: 14,654
References:  40
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.375 seconds