Environmentally Conscious Managers Set a Strategic Transfer Prices above Marginal Cost in Quantity Competition
Decision-making by environmentally conscious managers is important, because many companies emphasize environmental load reduction in practice. This study explores the level of transfer prices that are settled by environmentally conscious managers in quantity competitions. While observable strategic transfer prices are generally below the marginal cost in quantity competitions, our result suggests that the level of transfer price settled by an environmentally conscious manager exceeds the marginal cost in quantity competitions. This study provides a new rationale for the internal transfer price exceeding the marginal cost, which is observed in management accounting practice