Quantity Versus Quality in the Soviet Market for Weapons

22 Pages Posted: 19 Jul 2010

See all articles by Mark Harrison

Mark Harrison

University of Warwick; University of Birmingham

Andrei Markevich

New Economic School

Date Written: November 12, 2007

Abstract

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.

Keywords: Contracts, Dictatorship, Hold-Up Problem, Soviet Economy

JEL Classification: L2, N4, P2

Suggested Citation

Harrison, Mark and Markevich, Andrei, Quantity Versus Quality in the Soviet Market for Weapons (November 12, 2007). Available at SSRN: https://ssrn.com/abstract=1645651 or http://dx.doi.org/10.2139/ssrn.1645651

Mark Harrison (Contact Author)

University of Warwick ( email )

Department of Economics
University of Warwick
Coventry, CV4 7AL
United Kingdom

HOME PAGE: http://warwick.ac.uk/markharrison

University of Birmingham ( email )

Birmingham, B15 2TT
United Kingdom

Andrei Markevich

New Economic School ( email )

100 Novaya Street
Skolkovo
Moscow, 143025
Russia
+79629851892 (Phone)
+74991293722 (Fax)

HOME PAGE: http://fir.nes.ru/en/people/professors/Pages/amarkevich.aspx

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