Policy Implications. Assume you are concerned about managing corporate profitability as well as divisional decentralization and autonomy. Comment on each of these:

(a) From the viewpoint of the corporation, does any general transfer-pricing rule lead to the maximization of corporate profits?

(b) Why might a division manager reject a cost reduction proposal with a positive net present value, preferring instead to retain an inefficient old asset?

(c) Many firms use cost-plus or negotiated transfer prices even though they do not lead to optimal results for individual products. Why?

(d) Competitive market prices are often thought to be ideal transfer prices. Is this true? Explain your answer.

(e) Why might it be said that the goal of a divisional manager performance evaluation system should be to "create the least amount of dysfunctional behavior" by the individual manager?