Contributions published at Department of Business Administration (Egon Franck)

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This paper analyzes the use of transfer pricing as a strategic device in divisionalized firms facing duopolistic price competition. When transfer prices are observable, both firms' headquarters will exclude their marketing division from the external input market and charge a transfer price above the market price of the intermediate product to induce their marketing managers to behave as softer competitors on the final product market. When transfer prices are not observable, strategic transfer pricing is not an equilibrium, and the optimal transfer price equals the market price of the intermediate product. As an alternative, the firms can signal their competitor a transfer price above the market price of the intermediate input through a proper choice of their accounting system. The paper identifies conditions under which the choice of absorption costing is a dominant strategy for both firms. Moreover, when the firms' products are close substitutes, the strategic benefits of full cost based transfer pricing can provide incentives to maintain a production department that would not be able to survive as a separate firm in the long run.

Economic literature has proposed several incentive mechanisms in order to induce agents in divisionalized organizations to reveal their private information. Among these mechanisms the class of Groves mechanisms has the distinguishing property of implementing truthful reporting as an equilibrium in dominant strategies. However, critiques maintain that agents may collude and transmit false information to headquarters. This paper demonstrates that the agents' collusion game results in a prisoners' dilemma because agents cannot credibly commit themselves to play the collusive message strategies. The paper also outlines an organizational setting to enhance the plausibility of the fundamental assumptions underlying the Groves/Loeb approach, in which payoffs are observable ex post so that compensation contracts can be based on them. The task of informing headquarters is not assigned to the division manager himself but to a pertinent management accountant. This setting reduces the impact of subjective utility components of agents' payoffs so that the assumptions of this mechanism seem more realistic.

One of the major functions of transfer pricing is the optimal coordination of internal trade between responsibility centers in decentralized firms. According to standard theory the efficient level of internal trade is achieved by marginal cost pricing. If one of the firm's profit centers faces duopolistic competition on the final product market, the firm's headquarters can gain a strategic advantage when it systematically distorts the transfer price. Because headquarters cannot credibly commit to the equilibrium strategy that is induced by transfer pricing, the market outcome achieved by strategic transfer pricing cannot be replicated by centralized decision making. Since unobservable contracts cannot serve as credible precommitments unless they are employed for other than strategic reasons, the applicability of the basic concept is limited to observable transfer prices. When transfer prices are unobservable and the firms are facing price competition, however, the desired strategic advantages can also be achieved by a commitment to a full-cost system or by the delegation of the authority over the terms of internal trade to the producing division.

This groundbreaking book discusses the significance of a microeconomic approach to the transformation process in Eastern Europe from a theoretical and empirical perspective. It reveals that microeconomic conditions constitute the framework for the successful restructuring and recovery of the post-socialist countries in Europe.

Das Kreislaufwirtschaftsgesetz wird die Aufarbeitung, Reparatur, Instandsetzung und Modernisierung von Investitionsgütern (Remanufacturing) vorantreiben und die Strukturen des Gebrauchtmaschinenmarktes verändern. Unternehmen können auf diesem Markt nur dann erfolgreich sein, wenn sie ihre Strategie an diesen Veränderungen ausrichten.

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I m zweiten Teil der Antrittvorlesung von PD Dr. Andrea Schenker- Wicki an der Hochschule St. Gallen versucht die Autorin aufzuzeigen, wie die Leistungen einer Hochschule sichtbar und einem breiten Publikum verständlich gemacht werden und welche Methoden dabei zum Einsatz kommen konnen.

Die Antrittsvorlesung von PD Dr. Andrea Schenker-Wicki an der Hochschule St. Gallen ist auch für die Studierenden von aktueller Brisanz. Werden sie doch laufend gemessen, während die Leistung des Bildungsinstituts als ganzes oder gar einzelner Professoren im Bereich oft haltloser Einschätzung verbleibt. Neben studentischen Anliegen gibt es aber natürlich vorallem eine Reihe von volkswirtschaftlichen und gesellschaftlichen Gründen, die for eine Evaluation der Unis sprechen. Diesem "Warum?" ist der l. Teil der Vorlesung gewidmet.

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Strategic competitive intelligence is a necessity for corporate decision making in today's highly complex, “hypercompetitive” global markets, where current and potential rivals are encountered on multiple levels of competition. Key strategic decisions regarding diversification, downsizing from past diversification, and strategic alliances must be based on sound assessments of the competitive environment. Strategic CI, for example, can provide a basis for assessing the opportunities, necessities, and risks of present or future alliances, for making decisions regarding appropriate forms and intensities of present or future cooperative arrangements, and to choose among stable or variable forms of cooperation. Similarly, strategic CI can provide relevant knowledge concerning a firm's strategy‐related, structure‐related, and culture‐related challenges with respect to diversification. D'Avini's framework of four cooperative arenas highlights why, with respect to the new competitive realities, corporate‐level strategy requires dynamic, multi‐level, and multi‐arena competitive intelligence to identify and analyze probable threats and opportunities on all levels, and in all arenas, of competition.

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