A Review of Market Failures in the Defence Industry

Carlos Martí Sempere

Defence and Peace Economics, 2020, vol. 31, issue 6, 642-658

Abstract: The First Fundamental Theorem of Welfare Economics states that, under certain conditions, markets are able to supply goods and services in a way that is Pareto efficient. However, these stringent conditions are not satisfied in practice, giving way to the inefficient allocation of resources by market agents for such supply and a welfare loss. This article describes the reasons that impede the fulfilment of such conditions in the defence industrial market and the impact of such fact in the allocation process. It also discusses interventions and arrangements for palliating these market failures and for increasing the overall allocational efficiency.

Date: 2020
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DOI: 10.1080/10242694.2019.1581981

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