Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309610 
Year of Publication: 
2016
Citation: 
[Journal:] International Journal of Management and Economics [ISSN:] 2543-5361 [Volume:] 50 [Issue:] 1 [Year:] 2016 [Pages:] 27-48
Publisher: 
De Gruyter Open, Warsaw
Abstract: 
We use incentivized economics experiments to test both the point predictions and comparative static predictions of optimal transfer pricing models, comparing behavior under varying conditions, including wholly versus partially-owned subsidiaries and different tariff and tax rates. As predicted, we find that transfer prices are responsive to relative tax and tariff rates as well as ownership proportions. Additionally, we examine convergence and learning in this setting. While individuals do not choose optimal transfer prices, their choices converge to optimal levels with experience. This paper thus makes two important contributions. First, by comparing behavior with theoretical predictions it provides evidence of whether (and when) individuals set transfer prices optimally. Second, by comparing behavior under conditions of full and partial ownership it provides evidence on the impact of policy interventions (like regulating ownership proportions by MNEs) on tax revenues.
Subjects: 
transfer pricing
economic experiments
multinational enterprise
learning
JEL: 
C90
C91
L11
F23
H21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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