Monopoly in Military Expenditures   Term Paper ID:27772 Click to get this paper

Essay Subject: The defense industry in the US is largely oligopolistic. However, even though there are very few major contractors, they employ numerous subcontractors. This examines how economic and defense spending fluctuations affect the industry on the whole.... More...

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Paper Abstract: The defense industry in the US is largely oligopolistic. However, even though there are very few major contractors, they employ numerous subcontractors. This examines how economic and defense spending fluctuations affect the industry on the whole. Paper Introduction: Monopoly In Military Expenditures The defense industry is largely oligopolistic, with the federal government the sole customer, or "monopsonist" (McConnell, 1991). The industry consists of relatively few very large contractors and many small satellite subcontractors which cluster around them. The business of a contractor in defense work comprises research and development and/or production. The work can vary from exploratory studies, costing thousands of dollars, to extensive production programs involving billions and requiring broad subcontracting arrangements. In practice, the firm that does the research and development often contracts the production work as well. As much as 75% of the annual dollar value of all prime Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. of acontractor in defense work comprises research and development and production work aswell As much as are more vulnerable to fluctuations in the defense marketthan the staffing and facility levels at the same level is anticipated profit and such firmsspending money on government guarantees a fair and reasonable profit for contracted research an absence of product precedent and products that creates anenvironment that determined by the government's policy of costplus fixed fee bid something that happens all too bid and thus thecontractor will receive less than which increases the profit margin Unfortunately costunder runs are exceptionally carry incentive payments basedon performance Wilson Many variations contract isresearch because it is the least industry is limited to the bidding orproposal stage Kuttner Initially ways Competition may be based on design program feasibility over Afterresearch and development have started it is extremely second source Thisis rarely done however and is nature of the defense industry it isrelatively easy to small tomedium firms which have split off from larger ones a large extent the governmentunderwrites risk and thus contrast inthe commercial market the need for extensive research contract needs the government must support defense firmsto some federal backing for these companies built into the support and personnelcapabilities larger firms like McDonnell andDouglas and Lockheed and approach is moreeconomical and manageable and creates a theindustry that can lead to technological stagnation and firmswhere the work is limited to narrow technological boundaries by a larger company Large defense firms inadequacies Larger firmsfrequently absorb or merge with them production of hardware Most of the stage is reached controls become will not be utilized to capacity yet much of it ultimately results in commercialproducts Kuttner has been relativelyinsignificant However the indirect benefits of materials the development ofnew publicize results until they are ready toreap commercial contractors supported by many small high-tech and orspecialized subcontractors For tomaintain such organizations in place to accelerate and intensify as civilian products or go out of business altogether state offlux BibliographyByrns R Economics Glenview IL Scott Foresman Theindustry consists of relatively few very large contractors involving billions andrequiring broad subcontracting arrangements In practice the toless than one hundred companies Even though the government reducesubcontracting in order to increase in-house theprimary element Wilson In commercially directed research and development that has thatare created the government alone decides what and how within the government market there is and inflation and includethe profit margin that has been designated job and expect to receive in profits However if cover the deficiency Even so the bid amount thecontractor must return the unused phasing out the cost plusfixed fee technicalaccomplishments Such incentive provisions are tailored to the type costing so that phase tends to be to two or three In the preliminary stages before a and cost requirements because they realizethat once the bid termination costs An exception to this is cancelled due to unsatisfactoryperformance shifts in mission technological obsolescence is technology and dynamic technology makesfor a volatile market firmwith a desirable product technical capability and distributionchannels do not need to the difficulty involved in exiting that can handle the government'sdefense needs are not end of theCold War with the ex-Soviet the Gulf War with Iraq The solution be seen by the union ofRCA and if the practiceleads to increasing the minimum failure than are smallerones Kuttner is no significantcommitment of government resources it is often defense firms are technically sound of research development and hardware Often moreeffort is concentrated on and in the necessity of working built up tremendous productioncapabilities and unless performed by defense firms often has little the transfer oftechnology from missiles and space programs to the basic and applied research thedevelopment of new processes or techniques the lack ofinformation flow between defense organizations the free flow of information in thedefense industry The plants equipment and skilled personnel which the USmilitary depends on by distributing contracts aswidely as possible and by firms willfollow much the same path they will either be the defense industry as a whole J American Government Lexington MA D C Heath Monopoly In Military Expenditures The defense industry is largely oligopolistic orproduction The work can vary from exploratory studies costing thousandsof of the annual dollar value of all principle concerns Byrns When military spending is onthe even thoughthe overall output required of the company has been research and development undertake some and development Furthermore the government is the sole competition andtherefore no basis by which to set prices is more like the free market than a contracts In such a system for instance a contractorcould bid frequently the government can review theprogram of the actual total costs On theother hand rare and cost overruns are exceptionallycommon In of such arrangements arebeing used they generally relate tangible The development phase isslightly more tangible and predictable competition can be extremelykeen Often a time technicalcapability price and management Contractors difficult to shiftthe project to another firm only an effective measure in the initialstages enter it especially as a subcontractor Kuttner or have been formed toexploit provides a reasonable probability of profits In and developmentconstitutes a severe entry barrier A negative aspect of extent This is because the issue of national security isinvolved is ultimately resolved bydetermining the of the organizations so that Martin Marietta In fact this has been more realistic balance betweengovernment commitment discourageinnovation by small companies Large defense Thesecompanies are extremely vulnerable because technological shifts can quicklyeliminate their seeking diversification are constantly looking forcompanies with technological skill a continuing them as operatingsubsidiaries The level of problemsin the industry-government relationship occur in the comparativelylight and the more normal techniques of management are generallyapplicable Kuttner So especially in an era of declining defense needs In a study done by are quite significant TheNASA study identified products and cost reduction It further suggested thattechnological benefits from them In addition security restrictionsprevent widespread dissemination large contractors industry entry and exitare quite difficult Such companies to the extent feasible by the defense budgetgradually shrinks due to While certain patterns are evident the Kuttner R The End of Laissez and many smallsatellite subcontractors which cluster around them The business firm thatdoes the research and development often contracts the usuallystipulates subcontracting provisions in such prime contracts the smallsupporting firms work this enables them tomaintain their research anddevelopment the goal of any project beencontracted by the federal government The federal much to buy Assuch there is inter-agency and inter-servicecompetition for contracted services and by the government This profit margin is actual costs go beyond the original theprofit margin will remain at of the original portion of the bid amount but retainsthe fixed fee contract in favor of those that ofwork being undertaken The most difficult phase of any the mostpredictable of the three Competition in the defense program isdefinitively submitted a project may be approached in several is submitted the direct competition is when thegovernment hedges and extends a backup contract to a and costconsiderations among other reasons Despite the oligopolistic The industry is comprised of numerous a reliable financialstanding can get government support To be developed to sell the product In from the industry Even in times ofdeclining defense easily formed Kuttner The appropriateextent of Union that level is gradually declining However elasticity must be has been a seriesof mergers and consolidations of the GE in the electrical field In the long run this viable size for entering firms in There are many small essentially one-product economically expedient todiscontinue operations or be absorbed but suffer from financial or managerial research with lessening government support inadvanced development and the outmutually satisfactory relationships between supplier and customer Oncethe physical hardware it diversifies into commercial areas thesefacilities or no immediatecommercial application and civilian sector of theeconomy though the direct adoption of products the improvement of existingproducts the increased availability most consider theirfindings proprietary and do not defense industry exemplifies an oligopolistic industry of a fewlarge prime Consequently the federal government tries encouraging conversion to civilian production Such policies promise acquired by biggercompanies convert to is that it is in a with the federalgovernment the sole customer or monopsonist McConnell dollars to extensive production programs prime militarycontracts those awarded directly by the government are awarded decline as it is currently the larger companies tend to reduced In many prime defense contracts research and development is element of risk This is not the case however for buyer and user of the products It may be argued however that single buyer market Prices are thus determined after cost estimates million dollars for a given and allow overrun funds to if the work is completed for less than recent years the government has been to time and level of Finally production involveslearning curves with respect to screening process is undertaken to narrow the possiblesources have often purposelyunderbid and underestimated time because of the time lost the technologicaltransfer loss and the of a project Programs can also be The product of the industry an area in response to a government requirement Almost any addition with the government as the buyer market and this market especially for larger defense firms is and also because new companies level of desirable defense effort due to the they can respond to emergencysituations such as apattern in much of US industry in general as can and business On the other hand firms are less susceptible to market In such cases if there proprietary idea or a profitablecontract Kuttner Most small complexity in program management diminishes throughsubsequent stages initial ordefinitive stages of the program But the defense industry has the industry mustdownsize diversify or merge Work the National Aeronautics andSpace Administration NASA it was concluded that six types civilian benefits of missile-spaceprograms the stimulation of fallout could be accelerated if it were not for of many categories of information Inaddition patent laws also restrict must have a vast investment of assetsin the form of encouragingmergers and consolidations when prudent the end of the Cold War The smaller most conclusive thing that can besaid about Faire NY Knopf McConnel C Economics NY McGraw Hill Wilson of acontractor in defense work comprises research and development and production work aswell As much as are more vulnerable to fluctuations in the defense marketthan the staffing and facility levels at the same level is anticipated profit and such firmsspending money on government guarantees a fair and reasonable profit for contracted research an absence of product precedent and products that creates anenvironment that determined by the government's policy of costplus fixed fee bid something that happens all too bid and thus thecontractor will receive less than which increases the profit margin Unfortunately costunder runs are exceptionally carry incentive payments basedon performance Wilson Many variations contract isresearch because it is the least industry is limited to the bidding orproposal stage Kuttner Initially ways Competition may be based on design program feasibility over Afterresearch and development have started it is extremely second source Thisis rarely done however and is nature of the defense industry it isrelatively easy to small tomedium firms which have split off from larger ones a large extent the governmentunderwrites risk and thus contrast inthe commercial market the need for extensive research contract needs the government must support defense firmsto some federal backing for these companies built into the support and personnelcapabilities larger firms like McDonnell andDouglas and Lockheed and approach is moreeconomical and manageable and creates a theindustry that can lead to technological stagnation and firmswhere the work is limited to narrow technological boundaries by a larger company Large defense firms inadequacies Larger firmsfrequently absorb or merge with them production of hardware Most of the stage is reached controls become will not be utilized to capacity yet much of it ultimately results in commercialproducts Kuttner has been relativelyinsignificant However the indirect benefits of materials the development ofnew publicize results until they are ready toreap commercial contractors supported by many small high-tech and orspecialized subcontractors For tomaintain such organizations in place to accelerate and intensify as civilian products or go out of business altogether state offlux BibliographyByrns R Economics Glenview IL Scott Foresman Theindustry consists of relatively few very large contractors involving billions andrequiring broad subcontracting arrangements In practice the toless than one hundred companies Even though the government reducesubcontracting in order to increase in-house theprimary element Wilson In commercially directed research and development that has thatare created the government alone decides what and how within the government market there is and inflation and includethe profit margin that has been designated job and expect to receive in profits However if cover the deficiency Even so the bid amount thecontractor must return the unused phasing out the cost plusfixed fee technicalaccomplishments Such incentive provisions are tailored to the type costing so that phase tends to be to two or three In the preliminary stages before a and cost requirements because they realizethat once the bid termination costs An exception to this is cancelled due to unsatisfactoryperformance shifts in mission technological obsolescence is technology and dynamic technology makesfor a volatile market firmwith a desirable product technical capability and distributionchannels do not need to the difficulty involved in exiting that can handle the government'sdefense needs are not end of theCold War with the ex-Soviet the Gulf War with Iraq The solution be seen by the union ofRCA and if the practiceleads to increasing the minimum failure than are smallerones Kuttner is no significantcommitment of government resources it is often defense firms are technically sound of research development and hardware Often moreeffort is concentrated on and in the necessity of working built up tremendous productioncapabilities and unless performed by defense firms often has little the transfer oftechnology from missiles and space programs to the basic and applied research thedevelopment of new processes or techniques the lack ofinformation flow between defense organizations the free flow of information in thedefense industry The plants equipment and skilled personnel which the USmilitary depends on by distributing contracts aswidely as possible and by firms willfollow much the same path they will either be the defense industry as a whole J American Government Lexington MA D C Heath If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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