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Author: | Slof, E. J. |
Title: | Transfer prices and incentive contracts in vertically-integrated divisionalized companies. |
Journal: | European Accounting Review
1999 : VOL. 8:2, p. 265-286 |
Index terms: | Transfer pricing Incentives Investment incentives Econometric models Benchmarking Contracts |
Language: | eng |
Abstract: | This paper studies a divisionalized firm with sequential transfers in which central management wants to motivate two division managers who receive predecision information. Starting with the optimal compensation schemes as a benchmark, the paper considers the question whether using transfer prices to substitute for price and cost, respectively, can replicate the optimal solution or not. |
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