Alternative Verfahren zur Bestimmung innerbetrieblicher Verrechnungspreise

Summary

This paper compares the relative performance of alternative transfer pricing schemes. In our model, the transfer pricing method determines the quantity of an intermediate good to be traded. In addition, the transfer price generates incentives for the divisions to undertake specific investments in order to lower production costs or to raise revenues for the final product. If the transfer price is determined through negotiation between the profit center managers, both divisions tend to underinvest. However, for the case of linear cost functions and linear marginal revenue curves, we find that negotiated transfer pricing generally achieves higher expected firm profits than a scheme which bases the transfer price upon a standard costs quote issued by the selling division.