Document Type

Journal article

Source Publication

Operations Research Letters

Publication Date

9-1-2012

Volume

40

Issue

5

First Page

364

Last Page

369

Keywords

Transfer price; Cooperative game theory; The core; Shapley value

Abstract

We consider the transfer pricing decision for a multidivisional firm with an upstream division and multiple downstream divisions. The downstream divisions can independently determine their retail prices, and decide on whether or not they will purchase from the upstream division at negotiated transfer prices. To allocate the firm-wide profit between upstream and downstream divisions, we construct a cooperative game, show the convexity of the game, and then compute the Shapley value-based transfer prices for the firm.

DOI

10.1016/j.orl.2012.04.009

Print ISSN

01676377

E-ISSN

18727468

Publisher Statement

Copyright © 2012 Elsevier B.V. All rights reserved. Access to external full text or publisher's version may require subscription.

Full-text Version

Accepted Author Manuscript

Recommended Citation

Leng, M., & Parlar, M. (2012). Transfer pricing in a multidivisional firm: A cooperative game analysis. Operations Research Letters, 40(5), 364-369. doi: 10.1016/j.orl.2012.04.009