The structure of the defense industry and the security needs of the country: a differentiated products model |
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Authors: | Benny Mantin Asher Tishler † |
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Affiliation: | 1. Faculty of Management , Tel Aviv University , Tel Aviv 69978, Israel atishler@post.tau.ac.il;3. Faculty of Management , Tel Aviv University , Tel Aviv 69978, Israel |
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Abstract: | This paper models the interactions between the defense needs of the USA and Western Europe, which produce several heterogeneous defense goods, and the defense industry market structure. The results show that net defense costs of the USA and Europe are lower when the number of defense firms in each arms‐producing country is small and when the world prices of the defense goods are high. The model predicts that the increase in world prices will crowd‐out countries in the developing world from the market for modern weapon systems and may force them to develop and use ‘cheap and dirty’ weapon systems. |
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Keywords: | Defense industry Security levels Net defense cost Industry profits JEL codes: H56 H57 L11 L13 |
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