Optimal Transfer Pricing for the Multinational Firm

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management. Issues of the 1960's.Pricing decisions among affiliates of an international firm have come to be a serious problem. Accordingly, this article is devoted to formulating a theoretical model of transfer pricing in the multinational enterprise-a model which might later be used as the basis for an operational tool. To accomplish this, the article (1) explains the role of transferpricing decisions within the multinational firm, (2) builds toward an "optimal" transfer-pricing concept, and (3) indicates its limitations.