EUROPEAN DEFENCE FIRMS: THE INFORMATION BARRIER ON PRIVATE FINANCE
Damien Besancenot and
Radu Vranceanu
Defence and Peace Economics, 2006, vol. 17, issue 1, 23-36
Abstract:
After the fall of the Berlin Wall, European governments adopted a hands-off policy towards the defence industrial base, in an attempt to increase the sector's efficiency and reactivity. In this context, one topical issue is how to motivate defence firms to apply for private rather than public finance. Since banks have no prior experience with European defence firms, a problem of asymmetric information may block this transition. The problem is analysed within the framework of a game between defence firms and banks. It is shown that the Bayesian Equilibrium might correspond to a situation where low-risk firms prefer the state-financed scheme; yet, in a perfect information set-up, the same firms would apply for bank credit. In order to facilitate the transition to private finance, the government might decide to subsidize investors who agree on financing defence firms; the state aid should be made available during a transitory learning period.
Keywords: European defence firms; Private finance; Bayesian Equilibrium; Asymmetric information (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/10242690500216580 (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:taf:defpea:v:17:y:2006:i:1:p:23-36
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/GDPE20
DOI: 10.1080/10242690500216580
Access Statistics for this article
Defence and Peace Economics is currently edited by Professor Keith Hartley
More articles in Defence and Peace Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().