Keeping Two Sets of Books: The Relationship Between Tax and Incentive Transfer Prices

Multinational enterprises use two types of transfer prices: the tax transfer price to achieve optimal tax outcomes and the incentive transfer price to provide appropriate incentives to offshore managers. The two optimal transfer prices are independent if taxable income is assessed using the formula apportionment approach. Under the separate entity approach, however, they are interdependent: they both decrease as the penalty for noncompliance with the arm's length principle increases; and the tax transfer price decreases and the incentive transfer price increases as the marginal cost of production increases. We also examine the case where the incentive transfer price is negotiated rather than dictated by the parent. The results are robust to different market structures and tax environments.     

会计中的价值与成本问题

文章探讨"价值"与"成本"在财务会计和成本(管理)会计中的性质与功能。在财务会计中,价值通常来自市场,表现为过去的买入市价、当前的买入或脱手(销售)市价,这些价格可以称为历史成本、现行成本和公允价值,并作为财务会计与报表(报告)的计量属性。但成本会计中的成本则意味着产品成本,是由资产和其他资源的价值转化而来,在产品生产过程中,主要的信息是产品成本的分配、归集和积累,这里没有新价值可以确认,除非产品在市场交换。总之,在财务会计中,价值和成本信息表示一个企业的经营、投资和融资能力,而在成本会计中,只有成本信息表现管理层的才能(比如企业有效利用企业资源效率常表现为成本水平的高低)。     

Transfer prices and incentive contracts in vertically-integrated divisionalized companies

This paper studies a divisionalized firm with sequential transfers in which central management wants to motivate two division managers who receive predecision information. Central management can only contract on the observables price, cost and quantity. Starting with the optimal compensation schemes as a benchmark, the paper considers the question whether using transfer prices to substitute for price and cost, respectively, can replicate the optimal solution or not. This is to say, whether using an aggregate measure comes at a loss. The results are dependent on the design constraints (i) single or ‘dual’ transfer prices and (ii) simultaneous design of the reward functions or exogenously given reward functions. Basically, only in the case that central management is restricted to given reward functions, and wants to use the same single transfer price for both divisions, there is a loss relative to the benchmark solution. In the other cases, generally, there is enough latitude to design the available functions to mimic the benchmark. The paper goes on to discuss special cases. First, it finds conditions when purely cost-based transfer prices are optimal, and second, it derives explicit solutions for given linear compensation schemes over divisional book profits.     

A note on transfer prices and exchange rate pass-through

The paper builds a model of a parent corporation selling an intermediate product to a foreign subsidiary. The model is used to explain the response of foreign prices to changes in the exchange rate between the country of the parent affiliate and the foreign subsidiary. The model examines this response with and without an external market for the intermediate product.     

The two stages of an equity carve-out and the price response of parent and subsidiary stock

This paper provides evidence that an equity carve-out is usually the first stage of a two-stage process either to dispose of parent interest in a subsidiary or eventually re-acquire the subsidiary's publicly traded snares. Both the initial carve-out announcement and subsequent sell-off announcement yield, on average, significantly positive abnormal returns to parent shareholders. In contrast, the parent's price response to a re-acquisition of subsidiary shares is, on average, insignificantly positive. Both sell-off and re-acquisition announcements have a strong positive impact on subsidiary share prices. These gains, however, are offset by the subsidiaries' below-average return performance preceding the second event.     

基于熵权系数法的房地产市场比较估价模型研究

房地产估价方法主要包括收益现值法、成本法和市场比较法等,其中,市场比较法由于更加符合房价由市场决定的准则而成为房地产估价中常用的方法。市场比较法是以以往可比性交易实例为估价基础,通过对各因素差异修正来评价待估房地产价格。熵权系数法可用来完善现有的房地产市场比较法,通过从各个可比房地产项目构成的系统中计算各交易实例的熵值,以确定各交易实例相比于待估房地产的贴近度,进而确定待估房地产的估价。     

Why Lever into a Zero-Profit Industry: Tying, Foreclosure, and Exclusion

This paper considers the incentives of a firm with power in a market for one good to tie in the sale of a complementary good even though the complementary good is produced in a zero profit market. If the zero-profit price of the tied good is greater than the marginal cost (which occurs for example when the technology is characterized by a fixed cost and a constant marginal cost), a firm will fie in order to increase the sales of the complementary good, which at the margin is profitable. We show that such tying will lower the effective prices paid by customers and increase welfare. This incentive exists if the firm with market power is a monopolist or one of several competing oligopolists.     

Middlemen and Oligopolistic Market Makers

This paper studies the endogenous structure of intermediation when heterogeneous intermediaries choose between becoming a middleman or a market maker, and the relation between the equilibrium market structure and price dispersion. We obtain three main results: First, middlemen and oligopolistic market makers can coexist in the market equilibrium. All market makers publicly post unique ask and bid prices. These prices serve as the high and low bounds, respectively, for the ask and bid prices of middlemen, when capacity cost is sufficiently large. Second, more efficient intermediaries choose to become market makers, whereas less efficient intermediaries choose to become middlemen. Third, if the fixed cost of capacity installation for market makers increases, the number of market makers declines, whereas the number of middlemen increases. As a result, both ask prices and bid prices become more dispersed.     

物流企业如何应对高油价

国际原油价格持续上涨,国内成品油价格也不断攀升,给国内的物流业带来了明显冲击。文章在分析油价上涨对物流成本、物流市场结构、物流竞争结构的影响的基础上,提出了面对高油价我们一方面应降低物流成本,缓解高油价带来的成本压力,另一方面可以通过提高运输价格、加强企业间的合作和发展绿色物流来提高国内物流企业竞争力,以应对高油价带来的影响。     

转让定价、公平性感知和子公司业绩

基于组织公平理论的研究成果和转让定价现状,首先用组织公平理论的三维模式从分配公平、程序公平和互动公平三个维度分析了影响转让定价公平性感知的因素,如利润分配、发言权、信任、尊重等,然后探讨了转让定价公平性感知对子公司经理的行为和态度及子公司业绩的影响:公平性感知通过影响子公司经理的态度,如信任及满意度等影响子公司的业绩。最后提出了提升转让定价公平性感知的策略,如建立双向交流的机制、协商式的市场定价方法等,这些对集团转让定价政策机制的制定以及达成其战略目标有一定的指导意义。     

Strategic Incentives for Keeping One Set of Books in International Transfer Pricing

We study the equilibrium accounting and transfer pricing policies in a multinational duopoly with price competition in the final product market. We find that the firms in a duopoly can benefit from strategically using the same transfer price for tax and managerial purposes instead of using separate transfer prices for both objectives. According to our results, the practice of one set of books should be the prevalent accounting method in markets with a small number of competitors and similar products.     

House prices and consumer welfare

We develop a new approach to measuring changes in consumer welfare due to changes in the price of owner-occupied housing. In our approach, an agent's welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current house prices. We demonstrate that, up to a first-order approximation, there is no aggregate change in welfare due to price increases in the existing housing stock. This follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers. We show that this result holds (approximately) even in a model that accounts for changes in consumption and investment plans prompted by current house price changes. There can, however, be changes in welfare due to additions to the stock of housing, or to changes in the price of renovating and upgrading the existing stock of housing. For the United States, we estimate the welfare cost of house price appreciation to be an average of $127 per household per year over the 1984–1998 period.     

Cost-benefit analysis and the second best land use for transportation

Whether the naive cost-benefit analysis based on market prices tends to overinvest in roads is examined in the second best situation where traffic congestion is unpriced. The benefit and the cost calculated by using market prices are compared at the second best optimum. It is shown that the benefit exceeds the cost near the center of a city. However, if the compensated demand for housing has a price elasticity less than 1, the benefit becomes smaller than the cost near the edge.     

The Price Evolution in China's Automobile Market

The automobile market in China has seen unprecedented expansion during the past decade with rapid model turnover and dramatic price decline. This paper aims to document the evolution of price and investigate the sources of price decline, paying attention to both market structure and cost factors. We estimate a market equilibrium model with differentiated multiproduct oligopoly using market‐level sales data in China together with information from household surveys. Our counterfactual simulations show that (quality‐adjusted) vehicle prices have dropped by 33% from 2004 to 2009. The decrease in markup from intensified competition accounts for about one third of this change and the rest comes from cost reductions through learning by doing and other channels. In addition, our simulations show that the price decline would have been larger had it not been for the growth of household income during this period.     

基于政府补贴分析的新能源战略博弈模型研究

企业在新能源战略中如果不发展新能源战略带来的成本节约率ε1越高,其边际成本C1越低,新能源产品和传统产品的价格差异越大。随着消费者对每个环境满意度愿意支付的K值的增加,两个厂商的产品价格都会增加,也就是说,随着消费者环保意识的增加,环境满意度支付意愿也会增加,这样的结果不仅仅是生产新能源的厂商2受益,厂商1也会受益;政府提高市场最低绿色程度准入标准,低绿色程度的传统产品和新能源产品的价格都会增加。政府设定的市场最低绿色准入标准会对两个厂商的市场份额有影响。     

Oligopoly firms with quantity-price strategic decisions

An agent-based model is used to determine market equilibrium with price-setting firms in an oligopoly market. The agent-based model is designed to match the experimental rules that Brandts and Guillen (J Ind Econ 55:453–474, 2007) used with human subjects. Their model uses posted prices and advance production of a perishable good. When the marginal cost is zero, the analytical Bertrand solution is almost perfect competition. When the marginal cost is nonzero, the game does not have a theoretical equilibrium in pure strategies. The agent-based model results show that with one or two firms, prices are at or near the monopoly level, which matches the human experiments. With four firms, prices are always at the perfectly competitive level when particle swarm optimization is used. Results using a genetic algorithm, however, are noisier than those using the particle swarm optimization, and the genetic algorithm falls short of the competitive solution. The triopoly market changes from mostly monopoly to a price in between monopoly and perfect competition when a marginal cost is added. The computerized agents tend to overproduce so that profits are negative in the three- and four-firm cases when production is costly. While the prices in the simulation are close to those observed in experiments with human subjects, the inefficiency due to overproduction is much greater in the agent-based model results. This result suggests that human agents are able to reach solutions, perhaps through social norms, that are missed by the simple agent-based rules used here.     

Spatial duopoly with discriminatory pricing

The concept and existence of an equilibrium is established for profit maximizing competitors whose decisions involve choices of both delivered price schedules and firm locations. Each firm faces a production function; each is allowed to locate in the plane and to set discriminatory prices. Any transport cost function that is continuous in the firm location variable may be used. It is shown that the locations of the two firms are in equilibrium if each firm is minimizing social cost (i.e., the total cost to the firms of supplying the market with the good it demands is minimized) with respect to the opponent's fixed location.     

Quantity precommitment and price-matching

We study the effects of price-matching in a capacity-constrained duopoly setting. We show that no firm does worse at any pure equilibrium under price-matching relative to Bertrand, but as capacity increases, one or both firms do better relative to Bertrand. If the firms choose their capacities simultaneously before making pricing decisions, then the effect of price-matching varies with the cost of capacity. Specifically, when the cost is “high” price-matching either (i) has no effect on the market price, i.e., the market price associated with the pure SPEs is the Cournot one, or (ii) weakly decreases the market price relative to Cournot. Furthermore, when the cost is “low” price-matching leads to a set of (pure) SPE prices that includes the Cournot price in the interior. Therefore, price-matching does not necessarily benefit the firms when firms select their capacities before competing in price.     

Do credit market imperfections justify a central bank׳s response to asset price fluctuations?

Do credit market imperfections justify a central bank׳s response to asset price fluctuations? This study addresses this question from the perspective of equilibrium determinacy. In the model we use, prices are sticky and the working capital of firms is subject to asset values because of a lack of commitment. If credit market imperfections exist to a small degree, the Taylor principle is a necessary and sufficient condition for equilibrium determinacy, and monetary policy response to asset price fluctuations is good from the perspective of equilibrium determinacy. However, if credit market imperfections exist to a large degree such that the collateral constraint is binding, then the Taylor principle no longer guarantees equilibrium determinacy, and monetary policy response to asset price fluctuations becomes a source of equilibrium indeterminacy. We find that the existence of credit market imperfections makes it unsuitable to initiate a monetary policy response to deal with asset price fluctuations. We also find that reductions in credit market imperfections can enlarge the indeterminacy region of the model parameters.     

Price stickiness and markup variations in market games

In this paper, we show that the Shapley–Shubik market game model with production naturally generates an equilibration mechanism that can accommodate price stickiness arising from strategic interactions of firms. Unlike New Keynesian models that show similar price stickiness results, the market game model does not require enforcing menu costs or other additional restraints on price adjustment mechanisms in order to generate price stickiness. As such, we suggest that the market game model can provide a good micro-foundation for macroeconomic analysis. We then explicitly show the relationship between a typical firm’s markup of price over marginal cost and its market share.