In this article, the author presents a reply to the criticism of his study by researcher Thomas R. Dyckman, which discussed effects of restating financial statements for price-level changes. Dyckman has asserted that the null hypotheses tested in the author's study were false by definition, and therefore the tests performed were trivial. The author argues that this simply is not true. The null hypotheses tested were simulated investment decisions made in a given contest are the same whether based on historical-cost financial statements, current-value financial statements, or a combination of both types of statements; and these decisions, if different, are no "better" when based on any one of the information sets than when based on the other information sets. A considerable portion of Dyckman's comments concern the problems arising from the use of students in a laboratory situation. The limitations arising from these conditions are well known and are adequately acknowledged in the author's study.

This article presents a behavioral approach to transfer pricing problems. Since the transfer pricing problem only arises within a recognizable social system, be it an organization or a socialist economy, this article considers the solutions in a social system context. The paradigm developed can then be used to evaluate the usefulness and limitations of the various proposed solutions. Decentralization is one approach to organizational design. Implicit in this approach is the segmentation of the organization into various specialities. Numerous reasons are provided in the transfer price literature for decentralization. Decentralization, however, does not quite explain the process involved. A consequence of the segmentation of the organization into parts is that the behavior of organizational members will be influenced by the segmentation. Therefore, the term "differentiation" is used to include not only the segmentation of the organization into specialized parts, but also to include the consequent differences in attitudes and behavior of organizational members.