Internal Pricing (Paperback) (ISBN-13: 9781601982704)

Internal Pricing surveys the transfer pricing literature with a focus on commonly-used pricing schemes using incomplete contracting models. Chapter 2 develops the basic symmetric information model to compare the performance of cost-based and negotiated pricing in the absence of external input markets. Chapter 3 considers market-based pricing and the role of internal price adjustments; it ignores investments and focuses solely on trading incentives. Chapter 4 adds investments to the model of Chapter 3 and shows that investment opportunities further strengthen the case for internal adjustments. Chapter 5 reconsiders the initial analysis of Chapter 2 for the case of asymmetrically informed divisional managers. The book ends with the author's conclusions and an appendix including the mathematical proofs. A key theme running through Internal Pricing is that the firm's central office (i.e., headquarters) plays a rather limited role in mediating individual transactions. This captures the stylized empirical fact that in most firms, headquarters designs the broad "rules of the game" by choosing a pricing mechanism and compensation contracts, but usually does not get involved in pricing on a product-by-product basis.

Author: Tim Baldenius
ISBN-10: 1601982704
ISBN-13: 9781601982704
Publisher: Now Publishers
Language: English
Published: 09/22/2009
Pages: 106
Format: Paperback
Weight: 0.35lbs
Size: 9.21h x 6.14w x 0.22d