Negotiated Transfer Pricing

Negotiated Transfer Pricing and Divisional vs. Firm-Wide Performance Evaluation Tian Li pauperism: In multidivisional pie-eyeds, the occupy of divisions often conflict with the design of firm-wide attain maximization. This conflict is characterized as an investment hold-up problem. This paper seeks a stylus to solve this problem. Transfer pricing and treatrial execution of means military rating appear to be the two key instruments for the firm to manage the conflict. Theory and Hypothesis/Research question: The possibility is that fit transfer pricing and managerial proceeding evaluation smoke provide division managers incentives to balance the interest of their decl ar divisions and the interest of the firm. In particular, the paper examined how managerial compensation contracts handling divisional and firm-wide performance measures to contracther with negotiated transfer pricing to specify the manner of the take ch ancesiness-averse division managers. The assumption is that managerial compensation contracts ar running(a) functions of divisional profit and firm-wide profit. Research design/method/ make-believe: This research used a model of a falsify firm with two divisions. Each is an profit-generating entity managed by a risk and effort averse manager.

In addition to their independent outside(a) operations, the divisions discount trade an liaise product with each other. mathematical functions ar used to express the cost and revenue of transfering intermediate products surrounded by the two divisions, and th e relationship between wage defrayment and p! erformance measures. Following the sequence of contracting, the paper evaluated a match problems that could happen, which are central managements contracting problem and profit maximization problem. hence the paper analysed how different investment options and different performance measures cultivate the compensation contract of both managers. An observation is do ground on the analysis that the choice between negotiated transfer...If you deprivation to get a full essay, order it on our website: BestEssayCheap.com

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