<abstract xmlns="http://www.w3.org/1999/xhtml"><p>We use incentivized economics experiments to test both the point predictions and comparative static predictions of optimal transfer pricing models, comparing behavior under varying conditions, including wholly versus partially-owned subsidiaries and different tariff and tax rates. As predicted, we find that transfer prices are responsive to relative tax and tariff rates as well as ownership proportions. Additionally, we examine convergence and learning in this setting. While individuals do not choose optimal transfer prices, their choices converge to optimal levels with experience. This paper thus makes two important contributions. First, by comparing behavior with theoretical predictions it provides evidence of whether (and when) individuals set transfer prices optimally. Second, by comparing behavior under conditions of full and partial ownership it provides evidence on the impact of policy interventions (like regulating ownership proportions by MNEs) on tax revenues.</p></abstract>

We use incentivized economics experiments to test both the point predictions and comparative static predictions of optimal transfer pricing models, comparing behavior under varying conditions, including wholly versus partially-owned subsidiaries and different tariff and tax rates. As predicted, we find that transfer prices are responsive to relative tax and tariff rates as well as ownership proportions. Additionally, we examine convergence and learning in this setting. While individuals do not choose optimal transfer prices, their choices converge to optimal levels with experience. This paper thus makes two important contributions. First, by comparing behavior with theoretical predictions it provides evidence of whether (and when) individuals set transfer prices optimally. Second, by comparing behavior under conditions of full and partial ownership it provides evidence on the impact of policy interventions (like regulating ownership proportions by MNEs) on tax revenues.

Experimental Evidence on Transfer Pricing

Bridgewater State University, Bridgewater, USA

International Journal of Management and Economics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Experimental Evidence on Transfer Pricing"}

We use incentivized economics experiments to test both the point predictions and comparative static predictions of optimal transfer pricing models, comparing...

Experimental Evidence on Transfer Pricing

Data publikacji: 15 lip 2016

Zakres stron: 27 - 48

DOI: https://doi.org/10.1515/ijme-2016-0010

Słowa kluczowe
transfer pricing, economic experiments, multinational enterprise, learning

© 2016 Quoc H. Tran et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Experimental Evidence on Transfer Pricing

Data publikacji: 15 lip 2016

Zakres stron: 27 - 48

DOI: https://doi.org/10.1515/ijme-2016-0010

Słowa kluczowetransfer pricing, economic experiments, multinational enterprise, learning

© 2016 Quoc H. Tran et al., published by De Gruyter Open

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Słowa kluczowe
transfer pricing, economic experiments, multinational enterprise, learning