Strategic incentives for keeping one set of books under the Arm’s Length Principle
| Autor: | Ana B. Lemus, Diego Moreno |
|---|---|
| Přispěvatelé: | Ministerio de Ciencia e Innovación (España) |
| Rok vydání: | 2020 |
| Předmět: |
Sociology and Political Science
05 social sciences Subsidiary General Social Sciences Transfer pricing regulation Monetary economics Vertical separation Vertical integration Economía Competition (economics) Arm's Length Principle Incentive restrict Multinational corporation 0502 economics and business Imperfect competition 050206 economic theory Arm's length principle Business Statistics Probability and Uncertainty General Psychology 050205 econometrics |
| Zdroj: | e-Archivo. Repositorio Institucional de la Universidad Carlos III de Madrid instname |
| ISSN: | 0165-4896 2018-0985 |
| Popis: | The OECD’s recommendation that transfer prices between multinational enterprises and their subsidiaries be consistent with the Arm’s Length Principle (ALP) for tax purposes does not restrict internal pricing policies. However, we show that under imperfect competition firms may choose to keep one set of books (i.e., to set transfer prices consistent with the ALP), as a way of softening competition in the external market. As a result, firms’ profits are greater, and the surplus is smaller, than under vertical integration. In contrast, when firms keep two sets of books (i.e., their transfer prices differ from those used for tax purposes), competition intensifies in both markets relative to vertical integration. Moreno acknowledges financial support of the MCIU (Spain) , grant PGC2018-098510-B-I00. |
| Databáze: | OpenAIRE |
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