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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.

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Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0109.

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Length: 23 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:cfr:cefirw:w0109
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  1. 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.
  2. Markevich, Andrei, 2007. "The Dictator’s Dilemma : to Punish or to Assist? Plan Failures and Interventions under Stalin," The Warwick Economics Research Paper Series (TWERPS) 816, University of Warwick, Department of Economics.
  3. Schmitz, Patrick W., 2001. "The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," MPRA Paper 12562, University Library of Munich, Germany.
  4. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
  5. 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, 02.
  6. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, MIT Press, vol. 123(1), pages 1-48, 02.
  7. 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.
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