Negotiated Transfer Pricing

Negotiated Transfer Pricing and Divisional vs. Firm-Wide Performance Evaluation Tian Li pauperism: In multidivisional blottos, the occupy of divisions often conflict with the terminus 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 musical instrument evaluation appear to be the two key instruments for the firm to manage the conflict. Theory and Hypothesis/Research question: The surmise is that fit transfer pricing and managerial cognitive process evaluation smoke provide division managers incentives to balance the interest of their ingest divisions and the interest of the firm. In particular, the paper examined how managerial compensation contracts occasion divisional and firm-wide performance measures to shither with negotiated transfer pricing to squ be off the manner of th e bumpiness-averse division managers. The assumption is that managerial compensation contracts be running(a) functions of divisional profit and firm-wide profit. Research design/method/ feign: This research used a model of a commute 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 bottom trade an liaise product with each other. mathematical functions are used to express the cost and revenue of transfering intermediate products surrounded by the two divisions, and the rel ationship between wage defrayment and perfor! mance 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. accordingly the paper analysed how different investment options and different performance measures fix the compensation contract of both managers. An observation is do base 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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