The Transfer Pricing Problem with Non-Linearities

Details The Transfer Pricing Problem with Non-Linearities The Transfer Pricing Problem with Non-Linearities

2009-03-19

arxiv.org/abs/0903.3346v1

Economy

Quantitative Finance

General Finance

15 pages

Scientific paper

A number of approaches to solving the well-known transfer pricing problem are known. However, few models satisfactorily resolve the core problem of allowing both the source and receiving divisions to earn a profit on transfers during a period in such a way that sub-optimal output levels are avoided. In 1969, Samuel proposed to use a transfer price schedule instead of just a single transfer price. An essential improvement of Samuels' model was given by Tomkins (1990) in his pragmatic-analytical transfer pricing approach, which is a combination of a single cost-plus transfer price and the pragmatic process of negotiation. This fundamental approach was developed under the assumption that the net average revenue curve for the final product is linear. In this paper, Tomkins' pragmatic-analytical model is further developed for non-linear net average revenue curves. In particular, typical quadratic functions are considered and corresponding transfer price schedules are determined. A similar technique can be used for the transfer pricing problem with any net average revenue curve.

Affiliated with

Also associated with

No associations

Rating

The Transfer Pricing Problem with Non-Linearities does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with The Transfer Pricing Problem with Non-Linearities, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and The Transfer Pricing Problem with Non-Linearities will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-648754