Efficient Delegation by an Informed Principal

Consider the case of a firm with private valuation information bargaining with a supplier over the price and quantity of a good. If the firm and the supplier bargain directly, the bargaining outcome may not yield a first-best outcome due to the presence of information rents. The question we examine in this paper is whether these direct bargaining inefficiencies can be eliminated if the firm delegates the authority to negotiate with the supplier to an agent. We model the agent as an independent profit center that contracts with the parent firm as well as the supplier. The delegation of decision-making to the agent can influence the interaction between the firm and the supplier by altering the information rents the agent can claim from the supplier. To identify the role of delegation, we focus instead on two games. Both games have a continuum of equilibria, which we compare to the set of incentive efficient equilibria of the initial no-delegation bargaining game. The first game involves partial delegation as the firm controls the release of its private information through a public transfer price charged to the agent. Because the relationship between the agent and the uninformed supplier is one of full information, the unique equilibrium quantity is first-best yet we show that the informed firm still earns an information rent. The second game involves full delegation as the agent controls both the quantity choice and the release of the firm's private information. We show that the full delegation game has a large set of equilibria that includes all of the incentive efficient equilibria of the bargaining game as well as inefficient equilibria. We believe our notion of partial delegation can be reflected in firms organized as profit centers and the management practice of category managementDelegation, common agency

Tax induced transfer pricing under universal adoption of the destination-based cash-flow tax

The view that the transfer pricing problem vanishes under universal destination-based cash flow taxation (DBCFT) is based on how firms behave in perfectly competitive markets. We show that the neutralizing effect DBCFT has on transfer price incentives fails once multinational firms are multi-market oligopolists. Under imperfect competition, a multinational will delegate output decisions to its affiliates. The transfer price then takes on a strategic role because it influences competitors’ actions. Even if all countries adopt DBCFT, transfer prices will not equal arm’s length prices, and the global efficiency implications attributed to DBCFT are lost

Light regulation of metabolic pathways in fungi

Light represents a major carrier of information in nature. The molecular machineries translating its electromagnetic energy (photons) into the chemical language of cells transmit vital signals for adjustment of virtually every living organism to its habitat. Fungi react to illumination in various ways, and we found that they initiate considerable adaptations in their metabolic pathways upon growth in light or after perception of a light pulse. Alterations in response to light have predominantly been observed in carotenoid metabolism, polysaccharide and carbohydrate metabolism, fatty acid metabolism, nucleotide and nucleoside metabolism, and in regulation of production of secondary metabolites. Transcription of genes is initiated within minutes, abundance and activity of metabolic enzymes are adjusted, and subsequently, levels of metabolites are altered to cope with the harmful effects of light or to prepare for reproduction, which is dependent on light in many cases. This review aims to give an overview on metabolic pathways impacted by light and to illustrate the physiological significance of light for fungi. We provide a basis for assessment whether a given metabolic pathway might be subject to regulation by light and how these properties can be exploited for improvement of biotechnological processes

Tax Competition and Foreign Capital

This paper derives welfare equivalence of double taxation rules in a tax competition model with discriminatory home taxes and the ability to finance subsidiary operations with host country capital. For a more general model, we provide sufficient conditions on the number of host sectors and factors that support double-tax-rule equivalence. Examples violating these conditions help identify economic factors under which a home country's has strict preferences over double taxation rules. If the home tax rate can influence host factor prices, the home country weakly prefers deductions over credits as in the pure-home equity financing case