The Optimal Design of Transfer Pricing Rules: A Non-Cooperative Analysis

Pascalis Raimondos () and Kimberley Scharf

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: The literature on the regulation of multinationals' transfer prices has not considered the possibility that governments choose their transfer pricing rules in a non-cooperative fashion. The present paper fills this gap and shows that a non-cooperative equilibrium is characterized by above-optimal levels of effective taxation in comparison with a cooperative solution. We also derive conditions under which harmonization of transfer pricing rules lead to a Pareto improvement, and show that harmonization according to the 'arm's length' principle is not Pareto improving relative to the non-cooperative outcome.

Keywords: PRICING; TAXATION (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1997
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Citations: View citations in EconPapers (1)

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https://warwick.ac.uk/fac/soc/economics/research/w ... 95-1998/twerp502.pdf

Related works:
Working Paper: THE OPTIMAL DESIGN OF TRANSFER PRICING RULES: A NON-COOPERATIVE ANALYSIS (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:502

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