Negotiated transfer prices,and therefore production decisions,may reflect the negotiating skills of the parties rather than economic considerations.

Question

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Negotiated transfer prices are often determined through bargaining between different departments or business units within a company, and the final price may not necessarily reflect the actual economic value of the goods or services being transferred. Instead, the negotiated price may be influenced by factors such as the bargaining power of each party, perceived fairness of the price, and other non-economic considerations. Therefore, negotiated transfer prices and production decisions based on these prices may not always be optimal from an economic standpoint.

Negotiated Transfer Prices,and Therefore Production Decisions,may Reflect the Negotiating Skills