Abstract
We investigate how multinational two-sided platform firms set their prices on intra-firm transactions. Two-sided platform firms derive income from two customer groups that are connected through at least one positive network externality from one group to the other. A main finding is that, even in the absence of taxation, transfer prices deviate from marginal cost of production. A second result of the paper is that it is inherently difficult to establish arm's length prices in two-sided markets. Finally, we find that differences in national tax rates may be welfare enhancing, despite the use of (abusive) transfer prices as a profit-shifting device.
Original language | English |
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Pages (from-to) | 373-383 |
Number of pages | 11 |
Journal | International Journal of the Economics of Business |
Volume | 17 |
Issue number | 3 |
DOIs | |
Publication status | Published - Nov 2010 |
Externally published | Yes |