| Summary: | 碩士 === 輔仁大學 === 經濟學系碩士班 === 103 === Under underinvoice conditions, the model adds fine consideration to the profit
function of Multinational enterprises(MNEs) whereby theMNE's subsidiary competes
in quantities with a local firm in the local market. After studying how the MNEs will set the transfer price for maximizing profits under different law enforcement attitude of the government, the result shows that if we do not consider fine, the optimal transfer price will be acorner solution.After adding fine consideration, the transfer price could be a interior solution. MNEs will consider strategic effects and profit-shift effects to set an optimal transfer price. The result shows when a government increases tax or production costs in local country, MNEs have incentives to increase transfer price and transfer quantity in order to shift profits to countries which exist lower tax rates or lower cost.
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