Strategic Incentives for Keeping One Set of Books under the Arm's Length Principle

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dc.contributor.author Lemus Torres, Ana Belén
dc.contributor.author Moreno Ruiz, Diego
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned 2019-08-01T09:43:08Z
dc.date.available 2019-08-01T09:43:08Z
dc.date.issued 2019-08-01
dc.identifier.issn 2340-5031
dc.identifier.uri http://hdl.handle.net/10016/28676
dc.description.abstract The OECD's recommendation that transfer prices between multinational enterprises and their subsidiaries be consistent with the Arm's Length Principle (ALP) for tax purposes does not restrict internal pricing policies. However, we show that under imperfect competition firms may choose to keep one set of books (i.e., to set transfer prices consistent with the ALP), as a way of softening competition in the external market. As a result, firms' profits are greater, and the surplus is smaller, than under vertical integration. In contrast, when firms keep two sets of books (i.e., their transfer prices differ from those used for tax purposes), competition intensifies in both markets relative to vertical integration.
dc.description.sponsorship Moreno Acknowledges financial support of the Ministerio Economía (Spain), grant PGC2018-098510-B-I00.
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Economics
dc.relation.ispartofseries 19-14
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Transfer Pricing Regulation
dc.subject.other Imperfect Competition
dc.subject.other Vertical Separation
dc.subject.other Arm's Length Principle
dc.title Strategic Incentives for Keeping One Set of Books under the Arm's Length Principle
dc.type workingPaper
dc.subject.jel L1
dc.subject.jel L5
dc.subject.jel H2
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. PGC2018-098510-B-I00
dc.type.version draft
dc.identifier.uxxi DT/0000001720
dc.contributor.funder Ministerio de Economía y Competitividad (España)
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