A Regulatory Interpretation of DoD Profit Policy

Abstract

Military procurement is bound by the Federal Acquisition Regulations (FAR). These regulations imply profit constraints that are similar, but not identical, to the constraints on electrical utilities studied in the economics literature. In addition, it is hypothesized that DoD contractors do not maximize short-run profit, but rather hoard labor by maximizing a utility function defined over profit and labor. Maximization of this utility function subject to the FAR implies certain restrictions on the elasticities of derived demand for input. These restrictions are tested using annual financial data on four large military aircraft manufacturers.

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Document Details

Document Type
Technical Report
Publication Date
Oct 01, 1990
Accession Number
ADA236571

Entities

People

  • Matthew S Goldberg
  • Thomas P. Frazier
  • Thomas R. Gulledge

Organizations

  • Institute for Defense Analyses

Tags

Communities of Interest

  • Air Platforms
  • Space

DTIC Thesaurus Topics

  • Acquisition
  • Aerospace Industry
  • Aircrafts
  • Cardiovascular Physiological Phenomena
  • Contractors
  • Contracts
  • Defense Industry
  • Department Of Defense
  • Economic Analysis
  • Economics
  • Elastic Properties
  • Employment
  • Engineering
  • Government Procurement
  • Governments
  • Military Aircraft
  • Military Equipment

Fields of Study

  • Economics

Readers

  • Economics
  • Theoretical Analysis.