I wish to assess the usual profit made by a company in a country. This is for transfer pricing purposes - I need to know what the 'market rate' profit on sales is, so I can set inter-company transactions at a level which gives my subsidiary company the same 'market rate' return on sales.
"How Not To Be Wrong" (Jordan Ellenberg) has re-introduced me to large number theory. And raised an interesting question.
The smaller the sample size, the more similar my company is to the companies with which I am comparing it (they are operating in a more similar market).
However, the smaller the sample size the more variability is inherent in that sample size.
How do I assess when the differences between my company and the ones I am comparing it to are less than the inherent variability due to the sample size?
How do I balance these two competing drivers?