Cost-based transfer pricing under R&amp;D risk aversion in an integrated supply chain

Matsui, Kenji

doi:10.1016/j.ijpe.2011.10.030

Cited by 24 publications

(20 citation statements)

References 36 publications

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“…Subsequently, many works have discussed the alternative pricing forms available and the effect on decentralized firms of any resulting distortions. 3 Among these, several analytical accounting studies investigate the strategic effects of transfer prices using a game theoretic approach (e.g., Alles and Datar, 1998;Göx, 2000;Narayanan and Smith, 2000;Göx and Schöndube, 2004;Fjell and Foros, 2008;Shor and Chen, 2009;Dürr and Göx, 2011;Matsui, 2011Matsui, , 2012.…”

Section: Literature Reviewmentioning

confidence: 99%

Entry deterrence through credible commitment to transfer pricing at direct cost

Matsui

2013

Management Accounting Research

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This paper examines the choice between direct and absorption costing in a cost-based transfer pricing system for duopolistic firms competing with product market prices. Existing literature has shown that the adoption of an absorption costing system, which drives up the intrafirm transfer price, strategically dominates direct costing for the two firms, regardless of whether the transfer price is publicly observable, thereby constituting a subgame perfect Nash equilibrium (SPNE). However, we demonstrate that direct costing can strategically dominate absorption costing when one of the two firms is an incumbent, whereas the other is a potential entrant. Stated differently, the well-known result in the strategic cost allocation problem reverses if we consider entry threats. More specifically, we show that if the incumbent credibly commits to an observable transfer price, the upfront adoption of a direct costing system enables the incumbent to deter the entry of the potential rival in the SPNE. As a commitment device for the observable price, we consider the regulation of transfer prices that usually exists in oligopolistic network industries. We show that a regulator that pursues social welfare maximization approves direct costing but not absorption costing. Therefore, the firms and the regulator can share a mutual interest in the adoption of a direct costing system, a state thus sustained as the SPNE. This result yields managerial accounting implications for a divisionalized firm facing the threat of potential competitors entering the market in that the firm can use this accounting system to help monopolize the market.

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Section: Literature Reviewmentioning

confidence: 99%

Entry deterrence through credible commitment to transfer pricing at direct cost

Matsui

2013

Management Accounting Research

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“…Frascatore found that the profits of both the upstream and downstream enterprise of the supply chain will be raised if the upstream enterprise invests in the downstream enterprise's R&D of reducing production costs [16]. Matsui studied the impact of pricing methods of total-cost-based and variable-cost-based on the supply chain cooperative R&D policy under the condition that risk aversion production executives face the uncertainty of R&D investment [17]. Wang, Ji, and Ming found that the perfect shared contract of the information products supply chain can more effectively promote the transfer and absorption of knowledge among partners [18].…”

Section: Introductionmentioning

confidence: 99%

Collaborative R&D and Pricing Policy of Supply Chain under the Selection Behavior of Heterogeneous Customer

Huang

Saaty

2019

Mathematical Problems in Engineering

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Considering that a manufacturer and its core part supplier make collaborative R&D on serial products of 3 grades, high-, mid-, and low-grade, and their core parts according to costumers' preference for the performance, or intrinsic value, of products, we propose a collaborative R&D model based on costumers' selection behavior to study the collaborative R&D policy and pricing policy of the supply chain. Then we establish a bargaining game model to study how they allocate the profit they earned. We obtain the optimal policies through theoretic and experimental analysis, and we use Apple iPhone case to illustrate the models and conclusions of this paper. It is found that if the aim of the supply chain is only to maximize its total profit, it should only develop the high-grade product and make its price half of its intrinsic value; if the aim of the supply chain is to maximizing profit while increasing the sales and market shares of the serial products, it should at least develop the high-grade and low-grade product; the ratio of price between the higher grade and the lower grade should be greater than the corresponding ratio of the intrinsic value, while the difference of price between higher grade and the lower grade should be less than the corresponding difference of the intrinsic value.

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“…In the literature on supply chain management, most of the studies focus on coordination mechanisms and pricing strategies, redistributing costs, profits or social welfare along the supply chain [11][12][13][14][15][16]. In recent years, studies on sustainable supply chain is emerging and growing quickly.…”

Section: Introductionmentioning

confidence: 99%

Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing

Yin

et al. 2018

Sustainability

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As people concern themselves with environmental problems, the right to emit carbon dioxide becomes a new resource with business value that is incorporated in firms' budgets. This paper studies the optimal emission abatement decision for firms in a supply chain, considering emission costs. Four Stackelberg models are established that differ in free emission allowance allocation schemes and emission abatement cost-sharing schemes. On comparing optimal solutions in the models, the results show that regardless of which free emission allowance allocation scheme or emission abatement cost-sharing scheme is adopted, upstream firms tend to set a higher emission reduction rate. If supply chain firms aim for a higher emission reduction rate, they should advocate that upstream and downstream firms establish emission abatement cost-sharing contracts. The upstream firms should undertake larger emission reduction costs, and use free emission allowance allocation schemes based on emission intensity; the optimal emission reduction rate is related to carbon price, and the relationship may not be monotonous, affected by the difficulty of reducing emissions.

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Cost-based transfer pricing under R&D risk aversion in an integrated supply chain

Cited by 24 publications

References 36 publications

Entry deterrence through credible commitment to transfer pricing at direct cost

Entry deterrence through credible commitment to transfer pricing at direct cost

Collaborative R&D and Pricing Policy of Supply Chain under the Selection Behavior of Heterogeneous Customer

Low-Carbon Supply Chain Management Considering Free Emission Allowance and Abatement Cost Sharing

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