Arbeitspapier
Capacity Rights and Full Cost Transfer Pricing
This paper examines the theoretical properties of full cost transfer prices in multi-divisional firms. In our model, divisional managers are responsible for the initial acquisition of productive capacity and the utilization of that capacity in subsequent periods, once operational uncertainty has been resolved. We examine alternative variants of full cost transfer pricing with the property that the discounted sum of transfer payments is equal to the initial capacity acquisition cost and the present value of all subsequent variable costs of output supplied to a division. Our analysis identifies environments where particular variants of full cost transfer pricing induce efficiency in both the initial investments and the subsequent output levels. Our findings highlight the need for a proper integration of intracompany pricing rules and divisional control rights over capacity assets.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 7968
- Classification
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Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Dutta, Sunil
Reichelstein, Stefan J.
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2019
- Handle
- Last update
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10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dutta, Sunil
- Reichelstein, Stefan J.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2019
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