Top managers who wish to encourage decentralization will often make sure that both buying and selling division managers understand all the facts and then allow the managers to negotiate a transfer price.

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Encouraging decentralization involves delegating decision-making power to lower-level managers, including buying and selling division managers. Allowing them to negotiate a transfer price means that they have the freedom to determine the value of goods or services traded between the two divisions, which helps to ensure that both sides benefit from the transaction. This approach can increase autonomy and motivation among divisional managers and enhance the efficiency and effectiveness of the organization as a whole.

Top Managers Who Wish to Encourage Decentralization Will Often Make