TY - JOUR
AU - Baldenius, Tim
AB - This paper compares the performance of standard-cost with negotiated transfer pricing under asymmetric information. Negotiated transfer pricing generally achieves higher expected contribution margins, as this method tends to be more efficient in aggregating private information into a single transfer price. Standard-cost transfer pricing confers more bargaining power to the supplier and therefore generates better incentives for this division to undertake specific investments. The opposite holds for buyer investments. If a corporate controller has disaggregated information about divisional costs and revenues, then the firm can improve upon the performance of standard-cost transfer pricing by setting a centralized transfer price equal to expected cost plus a suitably chosen mark-up.
TI - Intrafirm Trade, Bargaining Power, and Specific Investments
JO - Review of Accounting Studies
DO - 10.1023/A:1009612901910
DA - 2004-10-16
UR - https://www.deepdyve.com/lp/springer-journals/intrafirm-trade-bargaining-power-and-specific-investments-EZIc7iP10N
SP - 27
EP - 56
VL - 5
IS - 1
DP - DeepDyve
ER -