The Impact of Control Policies on the Process and Outcomes of Negotiated Transfer Pricing.

Key Points

• The aim is to understand how control policies such as incentives and arbitration affect negotiated transfer pricing processes and outcomes.
• Conducted two laboratory experiments—one with high interdependence and another with low interdependence.
• Compared the effectiveness of firm-based incentive schemes and arbitration in negotiation processes.
• In high interdependence scenarios, either firm-based incentive schemes or arbitration were superior to using both.
• In low interdependence scenarios, the combination of both led to a better negotiating process, but had insignificant effects on outcomes.