Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2009/1:
Profit-shifting in Two-sided Markets
Dirk Schindler ()
and Guttorm Schjelderup ()
Abstract: We investigate how multinational two-sided platform firms
set their prices on intra firm transactions. Two-sided platform firms
derive income from two customer groups that are connected through at least
one positive network externality from one group to the other. A main
finding is that even in the absence of taxation transfer prices deviate
from marginal cost of production. A second result of the paper is that it
is inherently difficult to establish arm's length prices in two-sided
markets. Finally, we find that differences in national tax rates may be
welfare enhancing despite the use of such prices as a profit shifting
device.
Keywords: Multinational enterprises; two-sided markets; profit shifting; (follow links to similar papers)
JEL-Codes: D21; L24; (follow links to similar papers)
13 pages, April 14, 2009
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