How Elastic is the Government's Demand for Weapons?
AbstractWe attempt to make inferences about the elasticity of the government's demand for specific weapons by analyzing the statistical relationship between quantity and cost revisions across the population of major weapon systems, using data contained in the Pentagon's Selected Acquisition Reports. The cost revisions are due in part to the arrival of technological information generated in the course of research and development. When we standardize the data by program base year, we find that the elasticity of demand is .55, and is significantly different from both zero and unity. Thus, the governments demand for specific weapons is inelastic, but not perfectly inelastic. The estimates also imply that weapons acquisition is characterized by increasing returns: the mean and median values of the elasticity of total cost with respect to quantity are .78 and .72, respectively.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3025.
Date of creation: Apr 1990
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Lichtenberg, Frank R., 1989. "How elastic is the government's demand for weapons?," Journal of Public Economics, Elsevier, vol. 40(1), pages 57-78, October.
- Lichtenberg, F.R., 1988. "How Elastic Is The Government'S Demand For Weapons?," Papers fb-_88-39, Columbia - Graduate School of Business.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- A W. Marshall & W H. Meckling, 1962. "Predictability of the Costs, Time, and Success of Development," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 461-476 National Bureau of Economic Research, Inc.
- Jean Tirole, 1985.
"Procurement and Renegotiation,"
362, Massachusetts Institute of Technology (MIT), Department of Economics.
- Baron, David P & Besanko, David, 1988. " Monitoring of Performance in Organizational Contracting: The Case of Defense Procurement," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 329-56.
- Lichtenberg, Frank R, 1988. "The Private R&D Investment Response to Federal Design and Technical Competitions," American Economic Review, American Economic Association, vol. 78(3), pages 550-59, June.
- William P. Rogerson, 1988. "Profit Regulation of Defense Contractors and Prizes for Innovation : Theory and Evidence," Discussion Papers 759, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Yongmin Chen & Ron Smith, 2001. "Equilibrium Cost Overruns," Annals of Economics and Finance, Society for AEF, vol. 2(2), pages 401-414, November.
- Susan Guthrie & James R. Hines, Jr., 2008.
"U.S. Defense Contracts During the Tax Expenditure Battles of the 1980s,"
NBER Working Papers
14146, National Bureau of Economic Research, Inc.
- Susan J. Guthrie & Hines, James R. Jr., 2011. "U.S. DEFENSE CONTRACTS DURING THE TAX EXPENDITURE BATTLES OF THE 1980s," National Tax Journal, National Tax Association, vol. 64(2), pages 731-51, June Cita.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.