Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103689
Authors: 
Chwolka, Anne
Martini, Jan Thomas
Simons, Dirk
Year of Publication: 
2010
Citation: 
[Journal:] BuR - Business Research [ISSN:] 1866-8658 [Volume:] 3 [Year:] 2010 [Issue:] 2 [Pages:] 113-131
Abstract: 
This paper analyzes the potential of one-step transfer prices based on either variable or full costs for coordinating decentralized production and quality-improving investment decisions. Transfer prices based on variable costs fail to induce investments on the upstream stage. In contrast, transfer prices based on full costs provide strong investment incentives for the upstream divisions. However, they fail to coordinate the investment decisions. We show that negotiations prevent such coordination failure. In particular, we find that the firm benefits from a higher degree of decentralization so that total profit increases in the number of parameters being subject to negotiations.
Subjects: 
centralized management
decentralized management
investment
product differentiation
transfer pricing
negotiations
Persistent Identifier of the first edition: 
Document Type: 
Article

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