Suboptimisation occurs when managers do not act in the best interests of the company

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In decentralized companies, transfer pricing can be a complex issue as various departments or subsidiaries within the company may engage in transactions with each other. This can lead to suboptimal decisions if managers act in their own interests rather than those of the company as a whole. It is important to establish fair and accurate transfer pricing policies to avoid potential conflicts and ensure optimal decision-making.

Suboptimisation Occurs When Managers Do Not Act in the Best