Division Of Profits Research Articles

TRANSFER PRICING FOR COORDINATION AND PROFIT ALLOCATION

This paper examines coordination and profit allocation in a profit-center organization using a single transfer price. The model includes compensations, taxes, and minority interests of two divisions deciding on capacity and sales. The analysis covers arm’s length transfer prices which are either administered by central management or negotiated by the divisions. Administered transfer prices refer to past transactions and therefore maximize firm-wide profit net of divisional compensations, taxes, and minority profit shares only for given decentralized decisions. From an ex-ante perspective, it is shown that adverse effects on coordination may result in inefficient divisional profits of which all stakeholders suffer. We motivate a positive effect of advance pricing agreements, intra-firm guidelines, and restrictive treatments of changes in the firm’s accounting policy. By contrast, negotiations ignore compensations, taxes, and minority shares but yield efficient divisional profits. Negotiations seem compelling as they perfectly reflect the arm’s length principle. Moreover, common practices such as arbitration or one-step pricing schemes allow the firm to engage in manipulation at the expense of other stakeholders.

An innovative model of business management in knowledge-based organisations: the case of the business incubators

In this research, authors try to present one innovative, quantifiable and systematic model for management of incubation process in for-profit incubators with inspiration of the quality management principles and quantitative methods of decision-making. Authors also try to assist in increasing the effectiveness of turning knowledge to wealth process. The aforementioned model is based on rational division of profit between each of beneficiaries in an incubation process and this goal is achievable though declaration of two intelligent coefficients for each beneficiary. This research starts with a review on the literature and after taking quality management in knowledge-based organisations into consideration, it will continue with introducing a quantitative model of incubation process management for incubators as one of the typical examples of knowledge-based organisations. This paper concludes with a discussion about model’s application. Because the research-based organisations are deprived of comprehensive process management systems, the proposed model can provide a developable framework for organisations which have knowledge-based economics to motivate these organisations to promote.

THE ESCAPE-INFRINGEMENT EFFECT OF BLOCKING PATENTS ON INNOVATION AND ECONOMIC GROWTH

This study develops a Schumpeterian growth model to analyze the effects of different patent instruments on innovation. We first analyze patent breadth, which captures the traditionalpositiveeffect of patent rights on innovation. Then, we consider a profit-division rule between entrants and incumbents. Given the division of profit, increasing the share of profit assigned to incumbents reduces entrants' incentives for innovation. This aspect of blocking patents captures the recently proposednegativeeffect of patent rights on innovation. Finally, blocking patents generate anonmonotoniceffect on innovation when the step size of innovation is endogenous because of a novel escape-infringement effect. Calibrating the model to aggregate data, we find that a marginal increase in the blocking effect of patent protection is likely to enhance economic growth.

Dividing profits three ways: Exactness vs. consensuality

A rule for 3-way division of profits based on peer evaluation reports is impartial if the calculation of each partner’s share ignores her report, exact if it never allocates more or less than the profit to be shared, and consensual if it respects evaluations when the partners’ reports are in agreement. We use a calculus of variations technique to solve exactly a simple version of the problem of finding a 3-way exact, impartial division function of minimal average deviation from consensuality. We also give approximate solutions to three versions of the problem using a numerical analysis technique that is widely applicable.

On the optimal mix of patent instruments

A special characteristic of the patent system is that it features multiple patent-policy levers that can be employed by policymakers. In this note, we develop an R&D-based growth model to analyze the optimal mix of patent instruments by considering patent breadth and the division of profit in research joint ventures. Our results are as follows. First, we analytically derive the optimal mix of patent breadth and the profit-division rule. Then, we calibrate the model to quantitatively evaluate the welfare gain from optimizing both patent instruments versus optimizing only patent breadth. We find that the welfare gain can be quantitatively significant.

Marx e a divisão do lucro médio em lucro do empresário e juro

A concepção da divisão qualitativa do lucro médio em lucro do empresário e juro foi um importante feito teórico de Marx, pois permitiu fundamentar de modo coerente a conceituação do juro como parte da mais-valia, uma vez constituída a taxa média de lucro e sua materialização no lucro médio de cada capital. O objetivo deste artigo é desenvolver e formalizar algumas implicações desta conceituação, em alguns casos à primeira vista desconcertantes. A extensão e a formalização das implicações da divisão do lucro médio, elaboradas por Hilferding, com base nas indicações de Marx, permitiram revelar um novo ângulo do papel do sistema de crédito como potencializador do processo de acumulação. Demonstra-se no artigo que a taxa simples de lucro do empresário perde relevância como indicador de rentabilidade dos capitais, e propõe-se e fundamenta-se a utilização de novo indicador, ao mesmo tempo em que é apontada a relevância de um novo e decisivo fator na análise teórica das taxas de lucro dos capitais individuais.

Training delivers exemplary performance at TNT

PurposeDescribes award‐winning training that has transformed TNT's archive services division.Design/methodology/approachExamines the reasons for the training, the form it took and the results it has achieved.FindingsReveals significant improvements in divisional profits, productivity, employee engagement, employee turnover and sickness absence; employees enjoy what they do, feel empowered and believe in their management team.Practical implicationsPoints out that TNT calculates it has saved £1,455,640, taking into account the cost of the training.Social implicationsDetails how training programs can change people's attitudes.Originality/valueHighlights how training helped to transform the division from underperformance to one of exemplary status.

Efficient division of profits from complementary innovations

Abstract Many products—including microprocessors, telecommunications devices, computer software, and on-line auction services—make use of multiple technologies, each of which is essential to make or sell the product. The owner of one technology benefits from the existence of complementary technologies. We show that, despite this externality, the structure of payoffs that support efficient R&D investment by duopolists racing to discover a single innovation generalizes to the structure that supports efficient investment for complementary innovations. The paper also examines how alternative intellectual property regimes and legal institutions affect R&D investment in complementary technologies. The results have policy implications for the organization of R&D, the assessment of damages for patent infringement, and allocations of value in patent pools.

ON THE WINNER-TAKE-ALL PRINCIPLE IN INNOVATION RACES

What is the optimal allocation of prizes in an innovation race? Should the winner take all or is it preferable that first inventors share the market with late independent duplicators? This paper re-examines the issue taking into account that the incentives to innovate depend not only on industry profits but also on the division of profits between early and late inventors. In our baseline model two firms race for an innovation in continuous time. In the winner-take-all system as soon as one firm innovates the other stops investing in RD in the alternative more permissive system the laggard continues to invest to duplicate the innovation and when it also succeeds the market becomes a duopoly. We compare the two regimes on welfare grounds finding that the winner-take-all system can be socially optimal in a broad set of circumstances much broader than envisioned by the recent literature. We discuss why we arrive at di§erent results than the early literature and the policy implications of our analysis.

‘Aristocracies of thought’: social class in the early folklore of Yeats and Hyde

The years 1888–89 saw the production of two influential collections of Irish folklore: Fairy and Folk Tales of the Irish Peasantry by William Butler Yeats and Leabhar Sgeulaigheachta by Douglas Hyde. These works broke strongly with the unscientific and patronising tone of the Buchmärchen tradition in Ireland and established a new theory of folklore. In this theory, Yeats and Hyde distanced peasant narrators in an attempt to secure literary and, ultimately, aristocratic origins for their tales. As a result, Hyde and Yeats, despite their Ascendancy upbringings, could view themselves (and not the peasant narrators) as the legitimate inheritors of folklore narratives. The very stories collected, however, challenge this power dynamic. Stories such as ‘Monachar agus Manachar’ directly critique the perceived unjust division of labour and profit in rural Ireland in a way that parallels the act of folklore collection. The tales themselves resist the rhetorical frameworks of their Ascendancy collectors.

Coordination mechanism for the supply chain with leadtime consideration and price-dependent demand

We study a coordination contract for a supplier–retailer channel producing and selling a fashionable product exhibiting a stochastic price-dependent demand. The product’s selling season is short, and the supply chain faces great demand uncertainty. We consider a scenario where the supplier reserves production capacity for the retailer in advance, and permits the retailer to place an order not exceeding the reserved capacity after a demand information update during a leadtime. We formulate a two-stage optimization problem in which the supplier decides the amount of capacity reservation in the first stage, and the retailer determines the order quantity and the retail price after observing the demand information in the second stage. We propose a three-parameter risk and profit sharing contract that coordinates the supply chain. The proposed contract permits any agreed-upon division of the supply-chain profit between the channel members.

Profit Sharing Ratios in Mudaraba Contracts Revisited

This paper examines three interlinked issues: First, what is the current state of profit sharing in Islamic banking, that is, is the division of profit between the banks and the depositors satisfactory? Second, can the profit sharing in a two-tier mudaraba contract give the same rate of return to depositors as the bank receives from the investment of their deposits in business? Finally, can the central bank use in some ways the profit sharing ratio along with the rate of interest as an instrument for credit control in a dual banking system? The answer to the fi rst two questions is in the negative. To the third, a tentative response is yes. The paper also suggests a policy tool the central banks can presumably use for controlling credit, more so in view of the recurring financial crises like the one emanating from the US that the world is facing today. The tool may in addition help improve the link between the banks and depositors by adopting an iniquitous distribution of profits.

Transfer Pricing Practice in Times of Recession

The worldwide financial crisis and recession have had, and will have, a profound impact on the tax revenue of all countries. This article discusses how tax authorities and taxpayers may look at the division of profits and losses over countries as the outcome of the transfer pricing mechanisms.

FISHERY MANAGEMENT GAMES: HOW TO ADMIT NEW MEMBERS AND REDUCE HARVESTING LEVELS

This paper applies game theory to address the problem of allocating profits among fishing nations, once the countries concerned have expressed an interest in achieving an agreement through a Regional Fishery Management Organization (RFMO). Proposing the population monotonic allocation scheme as management rule for division of profits, we argue that existing RFMOs can be expanded by means of the Shapley value. We also show that adjustment from the Nash equilibrium to sustainable or more efficient can be achieved by means of the proportional rule without harming any of the countries involved.

Incentives, Cost Allocation and Taxes in a Multi-task Setting

This paper investigates strategic cost allocation in a single-period principal-agent setting, where the principal has two contractible performance measures available for contracting and the agent controls two productive tasks subject to moral hazard. In this setting, cost allocation shifts profit between the two performance measures (or between two taxable entities). There are two sources of error in cost allocation: random noise and strategic cost allocation under the agent's control. We first provide conditions under which such cost allocation errors lead the principal to abandon cost allocation and rely on a simple aggregate performance measure. We next consider a setting where the two performance measures represent divisional profits that are taxed at different rates. In this setting, the agent's ability strategically shift costs between the divisional performance measures is beneficial to the principal and leads to different relative performance weights for the two divisional performance measures.

Analysis of the impact of price-sensitivity factors on the returns policy in coordinating supply chain

This paper analyzes the impact of price-sensitivity factors on characteristics of returns policy contracts in a single-period product supply chain. The contract considers stochastic and price-dependent demand. We present an analytical model and then use numerical methods with the Stackelberg game to identify the contract properties. We numerically show that a returns policy indeed improves supply chain performance. However, the benefits earned from the returns policy, under price-sensitive and variable demand, are different for different supply chain partners. First, when price-sensitivity is high, profit of the manufacturer decreases with increase in demand variability. Second, when price-sensitivity is sufficiently high and demand variability increases, the manufacturer has to surrender part of the profits to the retailer, in order to continue sales. However, even after surrendering part of the profits to the retailer, the manufacturer still earns profits that are higher than those available in a wholesale price contract. Last, from the perspective of division of channel profits, the retailer is always worse off in case of returns policies than in a wholesale price contract. Therefore, to apply this form of incentive in practice, managements should consider the impact of price-sensitivity on the returns policy and its performance.

Can a nominal financial result and a nominal value of return on equity constitute a base for an assessment of effectiveness? Testing a research hypothesis

The conducted researches indicate explicitly that the assessment of the enterprise on the basis of the nominal value of the financial result and the nominal return on equity can lead to false financial decisions. In economies characterised by high inflation rates, financial results and the return on equity should not be treated as indisputable criteria of the financial situation of companies. An increase in profit driven by inflation should be considered as well; in some extreme situations, the division of such inflationary profit may lead to bankruptcy. This research is the first of this kind of analysis of agricultural companies in Poland.

Shareholder/Option Holder Profit Splits on Stock Buybacks as a Measure of Liability (#10) - Summary of 11 Case Studies (AMAT, CSCO, CY, INTC, NSM, NVDA, ORCL, SNPS, SYMC, TXN, XLNX)

The rapid growth of corporate stock repurchase programs raises questions pertaining to fiduciary responsibility for which the courts likely will be the ultimate arbiters. In the interim, some aspects of corporate liability can be gauged. For instance, if a company issues options equal to 25% of outstanding shares, then, in theory, shareholders/option holders to split future stock profits 80/20. Dividends, however, escape the contract and are paid exclusively to shareholders. To solve the dividend dilemma, corporations favor buybacks. Yet, buybacks tilt returns, too, but in favor of option holders. Measurement of the degree to which buybacks break the contract by delivering benefits skewed to option holders is one quantitative gauge of potential liability. In 11 case studies of companies that conduct $90.6 billion of buybacks in 2004-2007, the average company has an option plan that suggests shareholders and option holders will split future equity value growth 85/15 in favor of shareholders. However, the split from buyback benefits actually is 43/57 in favor of option holders. The 42 point excess return to option holders on average amounts to $1.013 billion per company. It is equivalent to a cost per share of 2.2% borne by shareholders. The capitalized cost to shareholders of the excess return to option holders from buybacks equals 13.7% of the average company's current stock price and is akin to a dividend paid by stockholders to option holders. Whether the skewed division of buyback profits is fair and reasonable depends upon the particular circumstances of each company.

The Division of Profit in Sequential Innovation for Probabilistic Patents

Sequential innovation with actual patent infringement and uncertainty in litigation is analyzed. Comparative statics shows that within a wide range of model parameters, a basic researcher holding a patent is able to extract all of the profit facilitated by the basic innovation. The patent holder achieves this by offering a licensing contract which the subsequent innovator accepts in the shadow of paying infringement damages. It is further demonstrated that, under rather general circumstances, broader patent breadth may diminish the patent holder’s incentive to innovate: that is to extract all of the profit from the subsequent innovator commercializing the innovation.

Ownership, incentives, and the hold‐up problem

Vertical integration is often proposed as a way to resolve hold‐up problems. This ignores the empirical fact that division managers tend to maximize divisional (not firmwide) profit when investing. I develop a model with asymmetric information at the bargaining stage and investment returns taking the form of cash and “empire benefits.” Owners of a vertically integrated firm will then provide division managers with low‐powered incentives to induce them to bargain more cooperatively, resulting in higher investments and overall profit as compared with nonintegration. Vertical integration therefore mitigates hold‐up problems even without profit sharing.