The role of transfer-pricing schemes in coordinated supply chains

Kashi R. Balachandran, L. I. Shu-Hsing, Taychang Wang, Hsiao Wen Wang

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


The objective of this paper is to study how transfer-pricing schemes interact with subcontractors' opportunistic behaviors to affect supply chain coordination. We model the supply chain by incorporating asymmetric information among all the parties, contractors' innovation activities, subcontractors' misappropriation, and transfer-pricing schemes. We examine the impact of various transfer-pricing schemes on supply chain efficiency. Specifically, we conduct a performance comparison between the variablecost transfer-pricing scheme and the full-cost transfer-pricing scheme. We find that the subcontractor's choice of transfer-pricing scheme affects the contractor's sourcing decisions and supply chain performance. For a selected set of parameters we show that the variable-cost transfer-pricing scheme achieves better supply chain coordination.

Original languageEnglish
Pages (from-to)375-404
Number of pages30
JournalJournal of Accounting, Auditing and Finance
Issue number3
StatePublished - 2010


  • Coordinated supply chains
  • Misappropriation
  • Nash bargaining solution
  • Transfer-Pricing scheme


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