A Development of Deterministic and Stochastic Transfer Pricing Models and Their Application to DOD

Abstract

Attempts to initiate user funding at Arnold Engineering and Development Center (AEDC) in the 1968-1971 time period were very unsuccessful. At that time much of the failure was attributed to the uncertainty of demand for the facility's services. The thesis first examines the origination of profit centers and transfer pricing in the private sector of the economy and the manner in which these concepts precipitated user funding in DOD. Next it presents mathematical formulations of optimal transfer prices under static and deterministic market conditions. Conditions of stochastic market demand and cost are then applied to those formulations to provide optimal transfer prices using maximization of expected profit as the decision criterion. Finally the stochastic demand model is applied to a simplified Test and Evaluation environment in order to determine the form of the optimal transfer price at AEDC.

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Document Details

Document Type
Technical Report
Publication Date
May 07, 1973
Accession Number
AD0769155

Entities

People

  • James D. Bain

Organizations

  • Air Force Institute of Technology

Tags

Communities of Interest

  • C4I
  • Human Systems

DTIC Thesaurus Topics

  • Air Force
  • Commerce
  • Commodities
  • Control Systems
  • Corporations
  • Department Of Defense
  • Economics
  • Governments
  • Inventory
  • Investments
  • Materials
  • Probability
  • Probability Distributions
  • Random Variables
  • Research Facilities
  • Test And Evaluation
  • Test Facilities

Readers

  • Computational Modeling and Simulation
  • Economics
  • Government Contracting/Procurement.