This study examines how a strategic tax auditor affects a multinational firm's transfer pricing in an incomplete information tax compliance game. Our model uses a divisionalized firm, in both a low-tax and a high-tax country, that decides to implement a transfer-pricing regime with either one or...

This study examines how a strategic tax auditor affects a multinational firm's transfer pricing in a tax compliance game. Our model uses a divisionalized firm, in both a low-tax and a high-tax country, that decides to implement a transfer-pricing regime with either one or two sets of books....

This paper analyzes strategic transfer pricing with risk and effort averse divisional managers. In contrast to earlier literature, we find that the existence of a standard agency problem allows transfer pricing to serve as a commitment device even if the transfer prices are not mutually...