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Quantity Versus Quality in the Soviet Market for Weapons


  • Mark Harrison

    () (Department of Economics, University of Warwick; Centre for Russian and East European Studies, University of Birmingham; and Hoover Institution on War, Revolution, and Peace, Stanford University)

  • Andrei Markevich

    () (Department of Economics, University of Warwick, and the Center for Economic and Financial Research, New Economic School, Moscow)


Military market places display obvious inefficiencies under most arrangements, but the Soviet defense market was unusual for its degree of monopoly, exclusive relationships, and intense scrutiny (in its formative years) by a harsh dictator. This provided the setting for quality versus quantity in the delivery of weapons to the government. The paper discusses the power of the industrial contractor over the defense buyer in terms of a hold-up problem. The typical use that the contractor made of this power was to default on quality. The defense ministry’s counter-action took the form of deploying agents through industry with the authority to verify quality and reject substandard goods. The final compromise restored quality at the expense of quantity. Being illicit, it had to be hidden from the dictator.

Suggested Citation

  • Mark Harrison & Andrei Markevich, 2007. "Quantity Versus Quality in the Soviet Market for Weapons," Working Papers w0109, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0109

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    References listed on IDEAS

    1. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 1-48.
    2. William P. Rogerson, 1994. "Economic Incentives and the Defense Procurement Process," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 65-90, Fall.
    3. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
    4. Mark Harrison, 2001. "Soviet industry and the red army under stalin : a military-industrial complex?," The Warwick Economics Research Paper Series (TWERPS) 609, University of Warwick, Department of Economics.
    5. Andrei Markevich, 2007. "The Dictator’s Dilemma: to Punish or to Assist? Plan Failures and Interventions under Stalin," Working Papers w0107, Center for Economic and Financial Research (CEFIR).
    6. Andrei Markevich & Mark Harrison, 2006. "Quality, experience, and monopoly: the Soviet market for weapons under Stalin -super-1," Economic History Review, Economic History Society, vol. 59(1), pages 113-142, February.
    7. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
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    Cited by:

    1. Dieter Balkenborg & Todd Kaplan & Timothy Miller, 2012. "A Simple Economic Teaching Experiment on the Hold-Up Problem," The Journal of Economic Education, Taylor & Francis Journals, vol. 43(4), pages 377-385, October.

    More about this item


    Contracts; Dictatorship; Hold-Up Problem; Soviet Economy;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • P2 - Economic Systems - - Socialist Systems and Transition Economies


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