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When should firm use direct intervention for transfer prices

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When would you advise a firm to use direct intervention to set transfer prices?

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Solution Summary

The 315 word cited solution provides four specific situations in which direct intervention could be effective.

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First, we understand that transfer pricing refers to the selling price for product or services between divisions within a company. The autonomy of divisions in many companies extends the matter of setting selling prices to the division managers, much as if they were selling directly to the public rather than to another part of the same company. This can be true in many large companies whose products may be diverse in type, location may be many, or other unique properties which set them apart.

It also follows that transfer prices based on market prices would generally be the ...

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