Industry Self-Governance and National Security: On the Private Control of Dual Use Technologies

Sebastian Engelhardt and Stephen Maurer

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: Private sector firms frequently sell dual use products that can be used to develop either civilian goods or weapons of mass destruction. The global character of these markets makes traditional regulation and treaty solutions difficult. Some existing initiatives by manufacturers have established private regulations that are stronger than official US policy. This paper explores the economic conditions that make such strong, industry-wide agreements stable. We assume two risks due to the dual use nature. First, upstream firms face legal liability if their products lead to a disaster. Second, a disaster may produce regulatory backlash, i.e. excessive government regulation that make downstream production prohibitive costly. We find that regulatory backlash is never an adequate substitute for perfect (i.e. full) liability and even makes the situation worse. Second, industry regulation enforced by downstream firms and optimal regulation converge when the downstream firms have strong market power. Next, we analyze when and why large downstream firms are able to force their preference for high levels of regulation on upstream suppliers. Finally we show that upstream incumbents may be able to deter entry in adopting a high regulatory standard.

JEL-codes: D82 L51 L59 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/66052/1/VfS_2012_pid_508.pdf (application/pdf)

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:zbw:vfsc12:66052

Access Statistics for this paper

More papers in VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().