Abstract
We consider the transfer pricing decision for a multidivisional firm with an upstream division and multiple downstream divisions. The downstream divisions can independently determine their retail prices, and decide on whether or not they will purchase from the upstream division at negotiated transfer prices. To allocate the firm-wide profit between upstream and downstream divisions, we construct a cooperative game, show the convexity of the game, and then compute the Shapley value-based transfer prices for the firm.
| Original language | English |
|---|---|
| Pages (from-to) | 364-369 |
| Number of pages | 6 |
| Journal | Operations Research Letters |
| Volume | 40 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 1 Sept 2012 |
Funding
The authors are grateful to an anonymous referee for a number of insightful comments that helped them to improve the paper. The first author (Mingming Leng) was supported by the National Natural Science Foundation of China under Grant No. 70901036.
Keywords
- Transfer price; Cooperative game theory; The core; Shapley value