Pricing Rules Research Articles

Uranium Price Expectations and Stabilization Policy Formation in the Manhattan Project: An Institutional Economics Approach

Abstract Governments, and uranium producers and buyers assess policy implications for uranium markets by understanding the price of uranium and the role of government policy over time. To understand the key elements in the formation of price and policy in uranium markets, this study uses the institutional economics method to investigate the institutional arrangements used for procuring uranium in the Manhattan Project (1942–1946). Throughout this period, the formation of price expectations was bounded by the opportunities to receive revenue from selling uranium ore as a by-product and as a main product. In regards to policy formation, price expectations were guided by the need to secure ore for customers, to secure income stability for producers, and to maintain competitive conditions in establishing price stabilization as the main policy. Similar pricing rules and concerns with price stabilization were adopted throughout the uranium market history. These recurring similarities in customs, which are understood through the underlying competitive behavior, are expected to be adapted to contemporary trends, such as global climate change, the joint ownership of mines, and the creation of the Low Enriched Uranium Bank. The contemporary trends represent the new negotiating circumstances for uranium market participants. Therefore, elements in understanding the formation of pricing and price stabilization policy during the Manhattan Project may be adapted to frame future assessments of uranium markets as participants consider advanced nuclear reactors and various nuclear fuel cycles as an option in adapting to contemporary trends.

New Brazilian Transfer Pricing Regime Edited by Government

On 29 December 2022, Provisional Measure 1,152 introduced new transfer pricing rules in Brazil with force of law but subject to further approval from Congress. The proposal put forward by the government replaced the previous regime, which deviated from international standards, with rules now convergent to the OECD Guidelines.

Pricing Principle via Tsallis Relative Entropy in Incomplete Markets

A pricing principle is introduced for nonattainable -exponential bounded contingent claims in an incomplete Brownian motion market setting. The buyer evaluates the contingent claim under the “distorted Radon–Nikodym derivative” and adjustment by Tsallis relative entropy over a family of equivalent martingale measures. The pricing principle is proved to be a time consistent and arbitrage-free pricing rule. More importantly, this pricing principle is found to be closely related to backward stochastic differential equations with generators of type. The pricing functional is compatible with prices for attainable claims. Except translation invariance, the pricing principle possesses lots of elegant properties, such as monotonicity and concavity. The pricing functional is shown between minimal martingale measure pricing and conditional certainty equivalent pricing under -exponential utility. The asymptotic behavior of the pricing principle for the ambiguity aversion coefficient is also investigated.

Transfer pricing tools for adjusting the company’s profitability

The article examines the tools for adjusting the company’s profitability, which can be used in transfer pricing. In recent decades, countries have adopted various rules to combat tax evasion and tax avoidance. Among such rules, it is advisable to single out the rules of transfer pricing and the rules of controlled foreign companies. These efforts have gained significant attention considering the G20 and OECD BEPS initiative. The regulations on transfer pricing contain regulations on the implementation of the «arm's length» principle. The regulations define the methods that can be used to calculate transfer prices, define documentation requirements, include in your application various special requirements necessary to confirm the transfer prices used, and establish penalties for detection of incorrect pricing or inadequate documentation. According to the legal and regulatory norms, the profitability of the controlled operation can be within the range and outside the price range. Depending on the type of controlled transaction, the company may not take any action (if all regulations are met) or may have to make an independent price adjustment. To determine profitability, it is necessary to sample prices and financial indicators of similar comparable operations on the market. The article discusses methods of transfer pricing: comparative uncontrolled price, resale price, «cost plus», net profit, distributed profit. The reasons for the drop in profitability have been identified. A credit note is defined as an effective tool for adjusting profitability. This tool allows for quality control and minimizing possible credit risks. International practice indicates the effectiveness of using the credit note mechanism to adjust profitability in transfer pricing. It was established that in Ukraine the legal status of a credit note is not defined in the legislative framework. This situation creates problems when using this tool and does not contribute to its wider use.

New Guidance in South Africa on the Definition of “Associated Enterprises” in Connection with the Transfer Pricing Rules

This article deals with a draft interpretation note entitled Definition of “Associated Enterprise” issued by the South African Revenue Service on 14 October 2022. The draft note provides guidance on the interpretation and application of the definition of “associated enterprise” which is to be included in section 31(1) of the Income Tax Law. The purpose of this inclusion is to bring the legislation in line with international standards and to address a potential anomaly and reduction in the tax base created by the exclusion of “associated enterprises” from section 31. A de facto approach is adopted in regard to the concepts “manage”, “control” and “capital”. The potential consequences of this are briefly dealt with.

Resource-specific Orders in European Day-ahead Market Under Different Pricing Rules

This paper addresses two issues that concern the electricity market participants under the European day-ahead market (DAM) framework, namely the feasibility of the attained schedules and the non-confiscation of cleared volumes. To address the first issue, new resource-specific orders, i.e., thermal orders for thermal generating units, demand response orders for load responsive resources, and energy limited orders for storage resources, are proposed and incorporated in the existing European DAM clearing problem. To address the second issue, two approaches which lead to a non-confiscatory market are analyzed: ① discriminatory pricing with side-payments (U.S. paradigm); and ② non-discriminatory pricing excluding out-of-money orders (European paradigm). A comparison is performed between the two approaches to investigate the most appropriate pricing rule in terms of social welfare, derived revenues for the sellers, and efficiency of the attained results. The proposed model with new resource-specific products is evaluated in a European test system, achieving robust solutions. The feasibility of the attained schedules is demonstrated when using resource-specific orders compared with block orders. Finally, the results indicate the supremacy of discriminatory pricing with side-payments compared with the current European pricing rule.

The value of the market price in contracts of sale: an analysis

Every rule should be valuable to the law. More so if the rule affects the commercial interest of society. A rule may be adopted or formulated to regulate commercial transactions, particularly to support the efficiency of the market. The market price rule is formulated to measure the degree of damages a contract defaulter should pay. The rule should indeed be applied consistently and reasonably to avoid uncertainty and unfairness. It follows that the market value as a rule and measure of commercial liability should not escape analysis to determine its limitations and value in contracts of sale. Thus, this article aims to provide a thorough discourse on the market price rule and how it should be applied in contracts of sale. The purpose of this article is to provide a comprehensive exposition of what informs the market price and how the market price affects the determination of damages in contracts of sale.

On the equilibrium of insider trading under information acquisition with long memory

In this paper, we study a general model of insider trading with a random deadline, in which an insider has some information acquisition on a risky asset at cost and noise traders trade with a process of stochastic volatility, both types of agents trading with some memory of their corresponding histories described by some kinds of fractional Brownian motions (FBMs) with Hurst parameters in $ (\frac{1}{2},1) $ respectively. With semimartingales approximating to FBMs, a closed form of market equilibrium consisting of instantaneous precision, linear trading rate and semi-strong pricing rule is obtained; and by product, a market equilibrium when the insider possesses the complete information on the asset before trading is also given. It shows that in the equilibrium, the price process converges almost surely to the fundamental value of the risky asset as time goes to infinite, and market depth is a semimartingale while not a martingale. As Hurst parameters both in insider's information flow and noise trades tend to $ \frac{1}{2} $, our results can converge to those respectively when both the insider and noise traders have no memory. Finally, some simulations are given to illustrate how informational efficiency, price informativeness or market liquidity vary with trading time, insider's cost, Hurst parameters or approximate factors of both noise traders' memory and insider's memory.

Envelopes of equivalent martingale measures and a generalized no-arbitrage principle in a finite setting

We consider a one-period market model composed by a risk-free asset and a risky asset with n possible future values (namely, a n-nomial market model). We characterize the lower envelope of the class of equivalent martingale measures in such market model, showing that it is a belief function. Then, we reformulate a general one-period pricing problem in the framework of belief functions: this allows to model frictions in the market and can be justified in terms of partially resolving uncertainty according to Jaffray. We provide a generalized no-arbitrage condition for a generic one-period market model under partially resolving uncertainty and show that the “risk-neutral” belief function arising in the one-period n-nomial market model does not allow to satisfy such condition. Finally, we derive a generalized arbitrage-free lower pricing rule through an inner approximation of the “risk-neutral” belief function arising in the one-period n-nomial market model.

Implementing problematic tax regulation: Hysteresis and bureaucratic revolutionaries within tax administrations

Worldwide emerging demands for additional and more sophisticated regulation are triggering regulatory changes at the national level that not all tax authorities are prepared to implement effectively. We examine this phenomenon through a single case study concerned with the implementation of the problematic transfer pricing rule by the Chilean tax authority. Drawing on semi-structured interviews, other qualitative sources, and inspired by the lesser used Bourdieusian constructs of hysteresis and bureaucratic revolutionaries, we unravel the emergence, persistence and resolution of hysteresis, i.e., a misalignment between tax administration practices and the expectations imposed on that organisation within the broader tax field. The paper finds that attempts to internationalise the tax system when regulators were inexperienced gave rise to hysteresis. It also explores how the standard of the rule, in conjunction with other structural conditions, influenced the decisions of senior tax officials, thus contributing to the persistence of hysteresis within the tax authority. Finally, it illustrates how one very senior tax official, with an interest in the regulation, acted as a bureaucratic revolutionary to resolve hysteresis and make the rule work in practice.

Efficient public good provision by lotteries with nonlinear pricing

In this paper, we introduce nonlinear pricing of lottery tickets to the mechanism of Morgan (2000), in which a lottery is used to finance the public good. In a model with n symmetric agents, we find that incorporating this instrument fully achieves the efficient provision of public good when each agent’s initial wealth is sufficiently high. In a model with two asymmetric agents, there exists a nonlinear lottery mechanism that induces efficient public good provision provided that agents are not too heterogenous. Intuitively, the proposed nonlinear pricing rule leads to a decreasing marginal cost for ticket purchase, which provides stronger incentives for agents to make contributions, compared with Morgan (2000).

Cooperative Purchasing with General Discount: A Game Theoretical Approach

In some situations, sellers of certain commodities usually provide price discounts for large orders according to a decreasing unit price function. Buyers of such commodities can cooperate and form purchasing groups to benefit from these price discounts. A natural way to allocate the corresponding cost reductions is the equal price rule. We analyze this situation as a cooperative game. We show that when the decreasing unit price function is linear, the equal price rule coincides with the Shapley value and the nucleolus of the cooperative game. However, some buyers may argue that the equal price rule is not acceptable because it favors those who buy just a few units of the product. This can be more problematic when the decreasing unit price function is nonlinear: In that case, the equal price rule loses some of its good properties and it no longer matches the Shapley value or the nucleolus. Unlike the linear case, in this nonlinear case, the Shapley value and nucleolus do not assign the same price to all agents, so there are different price rules. However, they have a computability problem, as both are very laborious to calculate for a large number of agents. To find a suitable alternative, we first study the properties that a different price rule should have in this situation. Second, we propose a family of different price rules that hold those properties and are easy to calculate for a large number of agents. This family of different price rules provides buyers (companies, institutions, consumers, etc.) with an easy-to-implement method which ensures stability in cooperative purchasing.

“FAR” to “FAIR”: Countering Environmental Damage by Making Transfer Pricing Fairer and More Equitable

Externalities like environmental pollution are comparability factors that remain invisible under existing transfer pricing rules. A separate evaluation of these externalities will enable a more accurate determination of the arm’s length price and may lead to redistribution of intra-group profits to polluting constituent entities, thereby augmenting revenue of jurisdictions that bear the environmental cost.

Model-based analysis of the effect of pricing rules and new entrants on the balancing market efficiency. Case study of the Swedish market

Balancing services are essential for the transmission system operator (TSO) to ensure system stability in the event of frequency deviations. The Swedish TSO has largely relied on reservoir hydro power plants to provide these services, including frequency containment reserve (FCR), using a complex cost-based methodology and awarding successful bidders on a pay-as-bid basis. Changing the pricing rule from pay-as-bid to marginal and moving from a cost-based to bid-based market may help diversify the pool of balancing service providers and stave off increasing FCR prices. In this paper, we investigate the economic effect of 1) introducing marginal pricing, 2) the entry of new technologies, wind generation and battery storage into the FCR market, and 3) how much new wind and storage capacity is necessary to counteract a potential system cost increase. For this, we develop an agent-based model of the Swedish FCR market for normal operation (FCR-N) and a reinforcement learning algorithm to emulate possible non-competitive behavior of market participants. We show that, in a current concentrated hydro-dominated market, a change to marginal pricing and freely set bids leads to skyrocketing FCR-N prices. The main driver is strategic behavior, as a result of which agents do not only increase their bid prices but also tend to withhold capacity increasing their profits through artificial scarcity. Furthermore, our results show that marginal pricing along with the entry of new technologies can counteract the rise of system cost and stabilize the market by combating strategic behavior.

Reinsurance Intra-Group Agreements – The Key Role of RE-EVA in Supporting the Arm’s Length Principle

In an economic context in which risk management plays an important role for the economic players, it is increasingly common to come across reinsurance transactions. In this context, multinationals often make use of reinsurance agreements, generating significant transnational flows with the related consequences also in terms of transfer prices. Despite the efforts made by the OECD with the publication of the new chapter X of the OECD Transfer Pricing Guidelines and with the clarifications provided on risk analysis, the common transfer pricing rules are not immediately applicable to reinsurance operations, also due to the complexity of the agreements and the difficulty of applying the existing TP methods to them. Therefore, this article, having analysed the main transfer pricing risks associated with intercompany reinsurance transactions, intends to provide possible new tools to verify the compliance with the arm’s length principle of reinsurance agreements, such as the combined ratio, the capital release, actuarial analysis and the RE-EVA.

Challenges and Implications of Applying the Zimbabwean Domestic Transfer Pricing Rules: An SME Perspective

Purpose: Transfer pricing has largely been viewed in the context of crossborder transactions of multinational enterprises. Zimbabwe recently revised its transfer pricing rules to include domestic transactions. This study sought to explore the challenges and implications of transfer pricing legislation for SMEs. Methodology: A qualitative inquiry is applied with the use of in-depth interviews and a questionnaire survey. Thematic analysis was used to analyse both interview and questionnaire data. Findings: The findings revealed that the paradox of observing fairness as a canon of taxation by equally taxing domestic and cross-border transactions has both economic and social implications for the Zimbabwean economy. It was evident that SMEs find themselves unduly burdened with compliance costs, capacity limitations as well as knowledge constraints in complying with the rules. Originality or Value: The implications of transfer pricing rules on SMEs have not been explored in the Zimbabwean context. The study explores a critical sector that has often been neglected in the transfer pricing discourse. It recommends that the government revisit the applicability of domestic transfer pricing legislation to SMEs.

Dynamic demand management and online tour planning for same-day delivery

For providers to stay competitive in a context of continued growth in e-retail sales and increasing customer expectations, same-day delivery options have become very important. Typically, with same-day delivery, customers purchase online and expect to receive their ordered goods within a narrow delivery time span. Providers thus experience substantial operational challenges to run profitable tours and generate sufficiently high contribution margins to cover overhead costs. We address these challenges by combining a demand-management approach with an online tour-planning approach for same-day delivery. More precisely, in order to reserve capacity for high-value customer orders and to guide customer choices toward efficient delivery operations, we propose a demand-management approach that explicitly optimizes the combination of delivery spans and prices which are presented to each incoming customer request. The approach includes an anticipatory sample-scenario based value approximation, which incorporates a direct online tour-planning heuristic. It does not require extensive offline learning and is scalable to realistically sized instances with multiple vehicles. In a comprehensive computational study, we show that our anticipatory approach can improve the contribution margin by up to 50% compared to a myopic benchmark approach. We also show that solving an explicit pricing optimization problem is a beneficial component of our approach. More precisely, it outperforms both a pure availability control and a simple pricing rule based on opportunity costs. The latter idea is one used in other approaches for related dynamic pricing problems dealt with in the literature.

Transfer Pricing Rules: National and International Approach

Transfer Pricing Rules: National and International Approach

THE CURRENT STATE OF TAX CONTROL OVER TRANSFER PRICING IN UKRAINE

The purpose of the article is to summarize and present the genesis of transfer pricing in Ukraine, to identify the problems and to assess the prospects of Ukraine in this direction. Methodology. The theoretical basis was the developments devoted to transfer pricing and the impact of globalization processes on the transfer pricing mechanism of transnational corporations and the system of international regulation. The methodology of the study consisted of general scientific and special scientific methods of research: analysis and synthesis, induction and deduction, methods of analogy, differentiation, generalization. The information base of the study consists of regulatory legal documents, materials of monographic studies of foreign and domestic scientists, textbooks and manuals, international and Ukrainian scientific conferences, articles in periodicals and information base of the Internet. The results of the study showed that transfer pricing as a tax institute appeared in Ukraine in September 2013 against the background of increased attention to transnational corporations and international trade. Unlike many other requirements of tax legislation, transfer pricing has no clear regulatory framework, which creates many problems for both taxpayers and controlling authorities. Ukraine's experience shows that transfer pricing rules focus on shifting the tax base between countries and redistributing profits between related companies, as well as transferring income to low-tax countries. Practical implications. The practical significance of the study lies in a comprehensive analysis and assessment of the current situation of transfer pricing processes taking place in Ukraine. The experience of European countries and judicial practice which formed a number of important and progressive legal positions and conclusions on improvement of transfer pricing control can be used in practice for Ukraine. The practical novelty of the results consists in a comprehensive analysis of the impact of transfer pricing on the current state of tax management as a whole. Value/originality. With proper control over transfer pricing instruments, it is possible to significantly prevent the erosion of the tax base and, consequently, to increase the volume of taxation and ensure the economic security of the state at the proper level.

Can An Anti-Dumping Policy Be Substituted For Predatory Pricing?

One of the most contentious issues in international commerce is anti-dumping (AD). And among the controversies of this AD rule, there is also what is considered in “conflict” with business competition law, both in terms of the purpose of the regulations and from the rules themselves. One of them is related to predatory pricing. Therefore, this study aims to conduct further analysis regarding the possibility of predatory pricing rules in substituting anti-dumping regulations in Indonesia. Based on these aims, this study employs a normative method with a statutory and conceptual approach. This study then reveals that dumping can be classified as a predatory pricing practice in terms of indications and impacts. However, the legal consequences and consequences of the two are different. So it would be impossible if anti-dumping arrangements were substituted with predatory pricing. Nevertheless, this research still supports that anti-dumping regulations are included in the regulation or law prohibiting unfair business competition and monopolistic practices because the practice of dumping itself is an unfair business competition practice.