Arms Racing and the Costs of Arms Imports: A Stochastic Model

The paper draws on the demand for arms imports model of Levine and Smith (1995, 1997) using stochastic processes of the birth-death type in steady state. It assumes two antagonistic regional players engaged in an armaments race satisfying their demand for military hardware through imports from the international market. The paper examines the effects that arms imports have on the military balance between the two recipient countries. It constructs a state space of possible outcomes in terms of the military balance/imbalance between the two countries involved. A new variable is introduced which tries to encapsulate the absolute difference in their respective security functions at any moment in time. This variable affects the transition from one state of affairs to the other.