The research on transfer pricing in bidders alliance of merger under relational contracts

The effective condition of relationship contracts in cooperative alliance of bidders is that the driving force out of the alliance can increase the possibility of breaking the alliance by tempting one member of the alliance. The important thing for a stable alliance is to get the transfer pricing under relationship contracts between bidders in merger alliance. By real option, we establish a model for solving the problem of transfer pricing firstly when there is one potential tempter. And we make numerical simulation by the method of Monte-Carlo to get the price of compensation transferred from merger manager to merger promoter for the stable of alliance. And then we analyze the relationship between transfer payments and some related parameters. The conclusion is that: the positive transfer payments is brought from potential tempter to merger manager, which can decrease the possibility of breaking down the alliance by merger manager paying some extra compensation to merger promoter.