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| Author: | Avila, M. Ronen, J. |
| Title: | Transfer-pricing mechanisms: an experimental investigation |
| Journal: | International Journal of Industrial Organization
1999 : JUL, VOL. 17:5, p. 689-715 |
| Index terms: | INDUSTRIAL ORGANIZATION TRANSFER PRICING INTERNATIONAL |
| Language: | eng |
| Abstract: | This study evaluates, in a laboratory setting, the performance of the Ronen and McKinney (1970) and the Ronen (1992) transfer-pricing schemes. Both mechanisms possess, in theory, the property of inducing efficient production and truth-telling, while decision-making autonomy is maintained. The Ronen-McKinney scheme, however, allows for multiple Nash equilibria and if the divisions' managers coordinate their messages they are expected to exploit the mechanism at the expense of the overall profitability of the firm. |
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