Paper Info
Title
Transfer Pricing And Channel Structure Of A Multinational Firm Under Overseas Retail Disruption Risk
Abstract
Considering a chain-to-chain competition model, we formulate a new multinational firm's (MNF's) trade-off between global tax-planning gains (via transfer pricing) and channel decentralisation loss. In the presence of an established MNF's competition, it is optional for the new MNF to operate two divisions (one for domestic manufacturing and one for overseas retailing) or one integrated division selling products to an independent overseas retailer at a wholesale price. For the former, we characterise the new MNF's transfer pricing strategies and find that interestingly, MNFs might both keep profits in high-tax region due to the tense competition in the retailing stage. For the latter, we find that the new MNF's channel decentralisation via wholesaling can be a win-win situation for the established MNF and itself, when the new MNF's overseas retail cost is in a moderate range. We further examine the new MNF's overseas retail disruption risk and find that, this risk drives the new MNF to lower the transfer price sharply and intensifies the retail competition. We use contraction mapping argument to show the uniqueness of the system equilibrium.
Year
DOI
Venue
2019
10.1080/00207543.2018.1516902
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Keywords
DocType
Volume
global retailing, transfer pricing, channel competition, retail disruption risk
Journal
57
Issue
ISSN
Citations 
9
0020-7543
0
PageRank 
References 
Authors
0.34
15
4
Name
Order
Citations
PageRank
Baozhuang Niu1329.42
Yaoqi Liu200.34
Feng Liu301.35
C. K. M. Lee424328.86