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 good 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. The concept of arm’s-length price is used by tax authorities to determine the allocation of taxable liability for a multinational firm operating in two or more countries. See also transfer pricing.