The Optimization Of Multinational Corporations' Transfer Pricing

Multinational corporation is offered more chances than domestic corporation, but have to endure more risks. So Transfer pricing is widely used by multinational corporation. This paper presents two mathematical programming models of transfer pricing for multinational corporation, especially for Chinese multinational corporation.In the chapter 1, the paper give a narrative review of multinational corporation's studies. In the chapter 2, this paper evaluates some models of multinational corporation's transfer pricing, discuss their advantages and disadvantages. There are many factors affecting multinational corporation's transfer pricing, chapter 3 chooses some import ones and classifies them. Then the transfer pricing is formulated in a linear programming model and a objective programming model. Chapter 4 provides a hypothetical mathematical example to help understanding the models. Chapter 5 illuminates the strong points and shortcomings, and analyses why Chinese multinational corporations neglect transfer pricing, then gives some advises to them.The models in this paper include various rates of income taxation, quotas, duties imposed on imported produces, risks etc.. They can help top management making transfer pricing decision. Although these models have some shortcomings, for example models include too many parameters, and some parameters' value based upon management's perception, they are still the effective approaches for multinational corporation's transfer pricing determination problem.