Strategic Transfer Pricing with Risk Averse Agents

Göx, Robert F.; Schöndube, Jens Robert

doi:10.2139/ssrn.469641

Cited by 6 publications

(7 citation statements)

References 25 publications

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“…Arya and Mittendorf (2007) and show that the desire to distort the internal market provides the credibility necessary for unobservable transfer prices to have strategic value. Finally, in Göx and Schöndube (2004), an agency problem with a risk-averse manager provides the nonstrategic reason to set the transfer price above marginal cost, supporting its strategic value even if unobservable.…”

Section: Bertrand Competition 149mentioning

confidence: 98%

Competition and Cost Accounting

Narayanan

2013

FNT in Accounting

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Section: Bertrand Competition 149mentioning

confidence: 98%

Competition and Cost Accounting

Narayanan

2013

FNT in Accounting

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“…In accounting, Dürr and Göx () study the strategic use of a single transfer price for managerial and tax purposes (referred to as a one‐set‐of‐books policy); see also Narayanan and Smith (). Göx and Schöndube () demonstrate that in a setting with risk‐averse agents, transfer prices can be employed as a commitment device even if they are not observable since they are also used to provide incentives to the agent. All in all, it seems justified to say that the demand system (1) is standard in many subdisciplines of economic research.…”

Section: The Modelmentioning

confidence: 99%

“…by Gibbons (), Miller and Pazgal (), Jansen et al . (), Dürr and Göx (), and Göx and Schöndube (). At first glance, this seems reasonable, as the demand for firm i 's product for b = 0 only depends on the price of firm i and for increasing values of b the dependence of firm i 's demand on the price of the competitor increases.…”

Section: The Modelmentioning

confidence: 99%

Capturing Direct and Cross Price Effects in a Differentiated Products Duopoly Model

Kopel

Ressi

Lambertini

2016

The Manchester School

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We show that a frequently used direct demand system with product differentiation in a duopoly market generates unexpected effects of increasing the substitutability of firms’ products on prices, outputs, profits and welfare. Using the original demand system introduced by Bowley (The Mathematical Groundwork of Economics, Oxford, Oxford University Press, 1924) as a reference, we argue that this alternative model does not capture a consumer's taste for variety. Moreover, we demonstrate that positive values for the parameter which represents cross‐price effects in the alternative demand system corresponds to the regime of complementary products in the original Bowley model. As a consequence, for increasing values of this parameter—meant to capture increasing competition in the usual sense—prices do not converge towards marginal costs and profits do not vanish. Finally, we study a duopoly with international transfer pricing and demonstrate that conflicting policy conclusions are derived depending on which of the models is used to capture demand.

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“…The strategic value of delegation has been emphasized in the early literature by Schelling (1960). 3 It has been deeper analyzed in the presence of competition (Vickers, 1985;Fershtman and Judd, 1987;Göx and Schöndube, 2004). In these papers delegation serves as a commitment to act less aggressively in competition.…”

Section: Introductionmentioning

confidence: 99%