This video discusses the use of negotiated transfer prices.
When a corporation allows the manager of the selling division and the manager of the buying division to bargain with each other to determine a transfer price, this is known as negotiated transfer pricing. The use of negotiated transfer pricing preserves the autonomy of each division by giving the power to make decisions to the divisional managers. However, this can result in time being wasted while the managers argue over the price. Also, one or both of the managers may choose not to cooperate in the best interest of the firm.