ABSTRACT
The markets for many exhaustible resources are characterized by multinational enterprises. 1 This paper constructs a model of a multinational which extracts an exhaustible resource in two countries. The enterprise may transfer resource from one country to the other, and uses the resource in the production of a processed good in each country. We are especially interested in the internal transfer pricing policies of the firm. Section II demonstrates that under plausible tax and tariff schemes, the enterprise will adopt a transfer price equal to a governmentimposed lower limit. Attention is accordingly directed to the implications of varying transfer price limits.
