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An Analysis of Risk and Return in the Defense Market: Its Impact on Weapon System Competition

Author

Listed:
  • Willis R. Greer, Jr.

    (Naval Postgraduate School, Monterey, California 93943)

  • Shu S. Liao

    (Naval Postgraduate School, Monterey, California 93943)

Abstract

With growing austerity pressures from the Administration, Congress, and the general public, the Government's procurement policy has called for increased use of dual-source competition as a means of reducing acquisition costs. In practice, however, this policy has produced mixed results. The cause seems to be an inadequate understanding of the peculiarities of competition in the Government's market. This paper examines the risk and return available in the defense market, and relates it to the industry's propensity to compete. The results show that intelligent observation of the industry's capacity utilization rate would contribute to the development of a more efficient acquisition policy.

Suggested Citation

  • Willis R. Greer, Jr. & Shu S. Liao, 1986. "An Analysis of Risk and Return in the Defense Market: Its Impact on Weapon System Competition," Management Science, INFORMS, vol. 32(10), pages 1259-1273, October.
    • Handle: RePEc:inm:ormnsc:v:32:y:1986:i:10:p:1259-1273
    DOI: 10.1287/mnsc.32.10.1259
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    Citations

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    Cited by:

    1. Renaud Bellais & Martial Foucault & Jean-Michel Oudot, 2014. "Économie de la défense," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01052607, HAL.
    2. Abdullah Dasci & Kemal Guler, 2019. "Dynamic Strategic Procurement from Capacitated Suppliers," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 990-1009, April.
    3. Vettas, Nikolaos & Biglaiser, Gary, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    4. 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.
    5. K. T. Wallenius & N. K. Womer, 1989. "Cost realism in defense contracting," Naval Research Logistics (NRL), John Wiley & Sons, vol. 36(5), pages 533-557, October.
    6. James J. Anton & Gary Biglaiser & Nikolaos Vettas, 2014. "Dynamic Price Competition With Capacity Constraints And A Strategic Buyer," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 943-958, August.
    7. David S. Salkever & Richard G. Frank, 1995. "Economic Issues in Vaccine Purchase Arrangements," NBER Working Papers 5248, National Bureau of Economic Research, Inc.
    8. Hazra, Jishnu & Mahadevan, B., 2009. "A procurement model using capacity reservation," European Journal of Operational Research, Elsevier, vol. 193(1), pages 303-316, February.
    9. James J. Anton & Dennis A. Yao, 1990. "Measuring the effectiveness of competition in defense procurement: A survey of the empirical literature," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 60-79.
    10. Jain, Tarun & Hazra, Jishnu & Cheng, T.C.E., 2018. "Sourcing under overconfident buyer and suppliers," International Journal of Production Economics, Elsevier, vol. 206(C), pages 93-109.
    11. Sin-Hoon Hum & Moosa Sharafali & Chung-Piaw Teo, 2005. "Staggering Periodic Replenishment in Multivendor JIT Environments," Operations Research, INFORMS, vol. 53(4), pages 698-710, August.
    12. Jean‐François Angers & Duncan K. H. Fong, 1994. "Estimating moments of the minimum order statistic from normal populations—a bayesian approach," Naval Research Logistics (NRL), John Wiley & Sons, vol. 41(7), pages 1007-1017, December.
    13. Wedad J. Elmaghraby, 2000. "Supply Contract Competition and Sourcing Policies," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 350-371, April.
    14. Tunay I. Tunca & Qiong Wu, 2009. "Multiple Sourcing and Procurement Process Selection with Bidding Events," Management Science, INFORMS, vol. 55(5), pages 763-780, May.
    15. Fong, Duncan K. H. & Gempesaw, Virginia M. & Keith Ord, J., 2000. "Analysis of a dual sourcing inventory model with normal unit demand and Erlang mixture lead times," European Journal of Operational Research, Elsevier, vol. 120(1), pages 97-107, January.

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