EconStor >
Universität Duisburg-Essen (UDE) >
Institut für Betriebswirtschaft und Volkswirtschaft (IBES), Campus Essen, Universität Duisburg-Essen >
IBES Diskussionsbeiträge, Universität Duisburg-Essen >

Please use this identifier to cite or link to this item:

Full metadata record

DC FieldValueLanguage
dc.contributor.authorCarstens, Stefanen_US
dc.contributor.authorWeinem, Michaelen_US
dc.description.abstractWe examine the implementation of efficient decisions about accepting a special order with asymmetric information by means of a dual transfer pricing mechanism based on Ronen and McKinney (1970). The model is designed in a simple fashion, two vertically related divisions within a firm (manufacturing and distribution) process a special order of a single product. Each division manager has private information about the divisional parameters (production costs and profit margin) and both report simultaneously to the other manager. The reports mutually affect the managers’ payoffs by determining the transfer payments which are payed to both divisions. Subsequently, based on the reports, the principal decides if the special order will be accepted. The outcome of this model is that cheating is a Bayes-Nash equilibrium and is Pareto-efficient, but truth-telling is a dominant strategy incentive-compatible equilibrium and strongly risk-dominates cheating. When adding an additional stage to the game, the accounting stage, it becomes clear that the incentives are inverse to those in Ronen and McKinney (1970) as the incentives to cheat disappear. The reason is that the managers only receive the 'award' from cheating if they indicate the true information in the accounting stage. If they choose to report untruthfully then they suffer a loss as they need to pay the difference between the true and the incorrectly accounted value out of their own pocket. It follows that this model design is more robust against cheating than the introduction of a penalty, as studied by Ronen (1992). Therefore, dual transfer prices are able to implement the first-best solution. These results also clearly disprove the main results of Wagenhofer (1994).en_US
dc.publisherFachbereich Wirtschaftswiss., Univ., Gesamthochsch. Essenen_US
dc.relation.ispartofseriesDiskussionsbeiträge aus dem Fachbereich Wirtschaftswissenschaften, Universität - Gesamthochschule - Essen 114en_US
dc.subject.keywordagency theoryen_US
dc.subject.keywordBayes-Nash equilibriumen_US
dc.subject.keyworddual transfer pricingen_US
dc.subject.keywordincentive compatibilityen_US
dc.subject.keywordrisk dominanceen_US
dc.subject.stwInnerbetriebliche Leistungsverrechnungen_US
dc.subject.stwBehavioral Accountingen_US
dc.titleIncentive compability of dual transfer pricingen_US
dc.typeWorking Paperen_US
Appears in Collections:IBES Diskussionsbeiträge, Universität Duisburg-Essen

Files in This Item:
File Description SizeFormat
341035122.pdf206.88 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.