arm's-length price

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The price that two unrelated parties would agree for a transaction conducted in the absence of duress. If the good involved in the transaction is traded on a competitive market then the equilibrium price is the arm's-length price. If the good is not traded, such as an intermediate input transferred between two subsidiaries of a single firm, then the arm's-length price is intended to reflect the equilibrium price that would emerge if it were traded.

Subjects: Economics.

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