Large firms are often decentralized to facilitate control and evaluation of performance. With decentralization comes the question of how to value goods and services "sold" by one division to another. A decentralized firm reaps the benefits of a quasi-entrepreneurial operation, but may also needto cope with divisional parochialism and discord. This article examines conflict between divisions involved in transfer pricing, suggesting that it is heightened if either division is seen as profiting at the expense of another, or if the customer division is not permitted to purchase transferred materials outside the firm.
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