Optimal Timing of Transfer Pricing in Multiple Integrated Marketing Channels

摘要

Currently, many firms across a wide range of industries vertically integrate with one another to become multidivisional firms that encompass both manufacturing and marketing functions. Such multidivisional firms that distribute products through multiple marketing channels routinely confront intrafirm frictions. In a channel management context, conflicts of interest between upstream divisions that manufacture products and downstream divisions that market products have firms struggling to determine the effective internal transfer price. Indeed, previous marketing studies have often portrayed transfer pricing as an instrument to facilitate transactions within distribution channels. If, for example, a channel is separated between a manufacturing firm and a retailing firm, the determination of the wholesale price is crucially important for channel coordination. Meanwhile, if the two functions are vertically integrated as one firm that includes a manufacturing division and a marketing division, the transfer price between the divisions has a crucial role for channel management. Hence, the role of the transfer price in a vertically-integrated firm corresponds to that of the wholesale price in a vertically-separated channel. In this respect, the investigation of channel coordination not only through wholesale prices but also through transfer prices is important from the marketing perspective.