Brand proliferation and inter-brand competition The strategic role of transfer pricing推荐.pdfVIP

The current issue and full text archive of this journal is available at /0144-3585.htm JES Brand proliferation and 35,3 inter-brand competition The strategic role of transfer pricing 278 Leonard Fong-Sheng Wang Department of Applied Economics, National University of Kaohsiung, Received September 2006 Kaohsiung, Taiwan, and Accepted June 2007 Ya-Chin Wang Department of Finance and Banking, Kun Shan University, Yung-Kang City, Taiwan Abstract Purpose – This paper first attempts to analyze the issue of brand proliferation by a monopolist allowing transfer pricing as a channel to bridge headquarters and brand divisions, and then to view how the headquarters uses transfer pricing as a strategic device to encounter intra-brand competition, inter-brand competition and cross-border profit-shifting under an oligopolistic market. Design/methodology/approach – This paper models cross-country interactions in a Cournot-Nash framework, and characterizes equilibrium that involves both transfer pricing and output decision. MNE’s behavior is based on a two-stage process in which the centralized headquarters’ prior action on setting transfer pricing is to backup the decentralized subsidiaries in their o