Price competition in a model of arms trade

Citation
Mc. Garcia-alonso, Price competition in a model of arms trade, DEF PEACE E, 10(3), 1999, pp. 273-303
Citations number
19
Categorie Soggetti
Economics
Journal title
DEFENCE AND PEACE ECONOMICS
ISSN journal
10242694 → ACNP
Volume
10
Issue
3
Year of publication
1999
Pages
273 - 303
Database
ISI
SICI code
1024-2694(1999)10:3<273:PCIAMO>2.0.ZU;2-V
Abstract
This paper presents a model of subsidized military production that examines the relationship between domestic procurement and arms exports. Weapon pro ducers satisfy the defence procurement in their own country and compete in prices in the international market where weapons are imperfect substitutes for each other. Importers are involved in an arms race situation and do not have domestic military production. The model makes explicit the strategic interaction between governments and firms in the export market. We then ana lyze the effect of a change in the most significant parameters on the equil ibrium. The paper suggests an explanation for the evolution of the arms mar ket in the past few years and highlights the important role of the demand a nd cost structures.