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November 11, 2018 at 2:42 pm
Sir in example 3 If company B cuts down it’s own cost They would too make a profit right? It would also lead to goal congruence So transfer pricing isn’t the only solution isn’t it? Even if company B cuts down it’s own cost It could too make profit for the division and also for the company too
John Moffat says
November 11, 2018 at 7:42 pm
True, but given that most of their costs are the cost of the transfers from A, there are not many costs they can cut are there? 🙂
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