ABSTRACT
Pricing and costs have long been linked in discussions of how markets function. A central idea in classical economics was that competition is good because it will drive prices down so that they correspond to costs. Pricing is usually discussed mainly from the seller’s point of view. A good price model should provide incentives for handling one’s role in the collaboration, while at the same time taking into account the “levers” of value creation that each party can influence. Internal prices then introduce yet another complication in judging the incentives and consequences from price models. The price models used for inbound pricing thus provide the incentives for joint efforts among the actors to match value and cost in a way that satisfies the final customer. Literature on transfer pricing has long discussed the merits and demerits of basing such prices on cost or some estimate of produced value.
