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dc.contributor.authorMcAdams, David
dc.contributor.authorMalone, Thomas W.
dc.date.accessioned2005-07-08T17:17:58Z
dc.date.available2005-07-08T17:17:58Z
dc.date.issued2005-07-08T17:17:58Z
dc.identifier.urihttp://hdl.handle.net/1721.1/18179
dc.description.abstractThis paper explores the possibility of solving supply chain capacity allocation problems using internal markets among employees of the same company. Unlike earlier forms of transfer pricing, IT now makes it easier for such markets to involve many employees, finegrained transactions, and frequently varying prices. The paper develops a formal model of such markets, proves their optimality in a baseline condition, and then analyzes various potential market problems and solutions. Interestingly, these proposed solutions are not possible in a conventional market because they rely on the firm's ability to pay market participants based on factors other than just the profitability of their market transactions. For example, internal monopolies can be ameliorated by paying internal monopolists on the basis of corporate, not individual, profits. Incentives for collusion among peers can be reduced by paying participants based on their profits relative to peers. Profit-reducing competition among different sales channels can be reduced by imposing an internal sales tax. And problems caused by fixed costs can be avoided by combining conditional internal markets with a pivot mechanism.en
dc.format.extent250701 bytes
dc.format.mimetypeapplication/pdf
dc.language.isoen_USen
dc.relation.ispartofseriesMIT Sloan School of Management Working Paperen
dc.relation.ispartofseries4546-05en
dc.relation.ispartofseriesMIT Center for Coordination Science Working Paperen
dc.relation.ispartofseries224en
dc.subjectsupply chain capacityen
dc.subjectinternal marketsen
dc.titleInternal Markets for Supply Chain Capacity Allocationen
dc.typeWorking Paperen


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