Lemus Torres, Ana BelénMoreno, DiegoUniversidad Carlos III de Madrid. Departamento de Economía2019-07-232019-07-232019-072340-5031https://hdl.handle.net/10016/28640The Arm's Length Principle (ALP) has been broadly adopted by OECD countries to avoid the use of firms' internal transfer pricing as a device for shifting profits into low tax jurisdictions. While the ALP does not affect market outcomes under perfect competition, we show that under imperfect competition its adoption is non-neutral: a strict (lax) application of the ALP softens competition among subsidiaries (parents). Thus, under imperfect competition regulating transfer pricing optimally requires trading off its impact on market outcomes and tax revenue.engAtribución-NoComercial-SinDerivadas 3.0 EspañaTransfer Pricing RegulationArm'S Length PrincipleImperfect CompetitionVertical Separationworking paperL13L51H26open accessDT/0000001719