Transfer Pricing Rules, OECD Guidelines, and Market Distortions
Bibliographic record
Abstract
Abstract We study the impact of transfer pricing rules on prices, firms' organizational structure, and consumers' utility in a two‐country monopolistic competition model with source‐based profit taxes. Firms can either be multinationals and serve the foreign market through a fully controlled affiliate, or be exporters and serve the foreign market by contracting with an independent distributor. The use of the OECD's comparable uncontrolled transfer price (CUP) rule distorts firms' output and pricing decisions, because the comparable arm's length transactions between exporters and distributors—which serve as the benchmark—are not efficient. We show that the CUP rule is detrimental to consumers in the low‐tax country, yet benefits consumers in the high‐tax country when compared to the benchmark of unconstrained profit shifting. Using the OECD rule increases tax revenue at the expense of consumer surplus. Those results also hold under the alternative cost‐plus transfer pricing rule.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.003 | 0.016 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.001 | 0.003 |
| Scholarly communication | 0.004 | 0.002 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.001 | 0.002 |
| Insufficient payload (model declined to judge) | 0.004 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".