Transfer pricing in a multidivisional firm : a cooperative game analysis

Mingming LENG; Mahmut PARLAR

doi:10.1016/j.orl.2012.04.009

Transfer pricing in a multidivisional firm : a cooperative game analysis

Mingming LENG, Mahmut PARLAR

Department of Computing and Decision Sciences

Research output: Journal Publications › Journal Article (refereed) › peer-review

21 Citations (SciVal)

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	https://doi.org/10.1016/j.orl.2012.04.009
Publication status	Published - 1 Sept 2012

Keywords

Transfer price; Cooperative game theory; The core; Shapley value

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10.1016/j.orl.2012.04.009

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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.",

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AU - PARLAR, Mahmut

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AB - 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.

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DO - 10.1016/j.orl.2012.04.009

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EP - 369

JO - Operations Research Letters

JF - Operations Research Letters

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Transfer pricing in a multidivisional firm : a cooperative game analysis

Abstract

Keywords

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