Transfer pricing in a multidivisional firm: A cooperative game analysis

Leng, Mingming; Parlar, Mahmut

doi:10.1016/j.orl.2012.04.009

Cited by 24 publications

(13 citation statements)

References 14 publications

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“…The primary decision for the manufacturer is to set the wholesale prices (w dd i ) and price of the online channel (p dd m ). Wholesale price differentiation is practiced in several markets, examples include markets such as petroleum distribution, steel, heavy trucking, tobacco, dairy products, and pharmaceutical etc., and several author argues for wholesale price discrimination (Leng and Parlar, 2012;Brunner 2013). In the CD, a single retailer (R) sells the product to the end consumers through two retail shops (RS1 and RS2) in two different geographical territories with different retail prices (p cd i , i=1,2).…”

Section: Mathematical Model and Analysismentioning

confidence: 99%

The impact of online sales in centralized and decentralized dual-channel supply chains

Moon

Sarmah

Saha

2018

EJIE

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Section: Mathematical Model and Analysismentioning

confidence: 99%

The impact of online sales in centralized and decentralized dual-channel supply chains

Moon

Sarmah

Saha

2018

EJIE

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“…Rosenthal (2008) developed a cooperative game that provides transfer prices for the intermediate products (when valuation is known and when their valuations differ) in a vertically integrated supply chain, providing a solution that is fair and acceptable to all divisions. Leng and Parlarb (2012) extended the work of Rosenthal (2008), constructing a cooperative game based on computing the Shapley value-based transfer prices for a vertically integrated supply chain firm with an upstream division and multiple downstream divisions, which can independently determine their retail prices, and decide whether or not they will purchase from the upstream division at negotiated transfer prices.…”

Section: 1mentioning

confidence: 99%

“…1). Division l makes its market pricing decision p l and sells q l (p l ) units of its intermediate goods to a given division l. Following Baldenius et al (1999) as well as Leng and Parlarb (2012), division l sales quantity q l , which is determined by a linear demand function, i.e.,…”

Section: Transfer Pricing Modelmentioning

confidence: 99%

Negotiating transfer pricing using the Nash bargaining solution

Clempner

Poznyak²

2017

International Journal of Applied Mathematics and Computer Science

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This paper analyzes and proposes a solution to the transfer pricing problem from the point of view of the Nash bargaining game theory approach. We consider a firm consisting of several divisions with sequential transfers, in which central management provides a transfer price decision that enables maximization of operating profits. Price transferring between divisions is negotiable throughout the bargaining approach. Initially, we consider a disagreement point (status quo) between the divisions of the firm, which plays the role of a deterrent. We propose a framework and a method based on the Nash equilibrium approach for computing the disagreement point. Then, we introduce a bargaining solution, which is a single-valued function that selects an outcome from the feasible pay-offs for each bargaining problem that is a result of cooperation of the divisions of the firm involved in the transfer pricing problem. The agreement reached by the divisions in the game is the most preferred alternative within the set of feasible outcomes, which produces a profit-maximizing allocation of the transfer price between divisions. For computing the bargaining solution, we propose an optimization method. An example illustrating the usefulness of the method is presented.

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“…In the cooperative setting, the retailers choose the globally-optimal retail prices that maximize the system-wide profit. As Leng and Parlar (2012) have stated, there are a lot of practical examples showing that the players "are" free to decide on whether or not cooperate with each other. For example, Ford Motor Company's Struandale engine plant in South Africa (an upstream player) supplies the Duratorq TDCi diesel engines to the firm's global assembly plants(multiple downstream players) which manufactures the Ford Ranger pick-up trucks (Leng & Parlar, 2012).…”

Section: Introductionmentioning

confidence: 99%

“…As Leng and Parlar (2012) have stated, there are a lot of practical examples showing that the players "are" free to decide on whether or not cooperate with each other. For example, Ford Motor Company's Struandale engine plant in South Africa (an upstream player) supplies the Duratorq TDCi diesel engines to the firm's global assembly plants(multiple downstream players) which manufactures the Ford Ranger pick-up trucks (Leng & Parlar, 2012). Those assembly plants are actually free to decide on whether they can buy from the plant in South Africa at negotiated transfer prices in the cooperative setting or at non-cooperative (Stackelberg equilibrium) transfer prices.…”

Section: Introductionmentioning

confidence: 99%

Cooperative game analysis of a supply chain with one risk-neutral supplier and two risk-averse retailers

Zhou

et al. 2014

JIEM

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Purpose: This paper considers a two-echelon supply chain composed of one risk-neutral supplier and two risk-averse retailers. The retailers obtain production from the supplier and sell them to the market. Based on the cooperative game theory, the paper studies the appropriate profit allocation of the supply chain when all the players cooperate with each other, where the two retailers face a price-sensitive stochastic demand. The two retailers can either determine their retail prices independently, or decide whether or not to cooperate with each other. Design/methodology: To allocate the system-wide profit among upstream risk-neutral suppliers and two risk-averse downstream retailers, this paper constructed a cooperative game model, considered as the supermodularity of the characteristic function and the Shapley value of the game. Findings: By analyzing the construction's cooperative game model, the results show that the profit of the whole supply chain is the highest in the grand coalition structure. This paper also shows that the core of our cooperative game is nonempty, and has the supermodularity property. Based on this, we have computed the Shapley value-based profit allocation for the whole supply chain in a fair manner.

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Transfer pricing in a multidivisional firm: A cooperative game analysis

Cited by 24 publications

References 14 publications

The impact of online sales in centralized and decentralized dual-channel supply chains

The impact of online sales in centralized and decentralized dual-channel supply chains

Negotiating transfer pricing using the Nash bargaining solution

Cooperative game analysis of a supply chain with one risk-neutral supplier and two risk-averse retailers

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