The Determinants of Aerospace Profit Rates 1951-1971

Abstract

There are a number of theoretical approaches which have been applied to the determination of profits in the American aerospace industry. Carroll [5, p. 545] views the government sector as essentially a bilateral monopoly, suggesting that the profit outcome will be determined by the relative bargaining strengths of the participants. Scherer [14, p. 371] describes the process of contract negotiations and asserts that the outcome depends upon the relative bargaining power and skill the two parties bring into negotiations. Agapos and Dunlap [1] assert that the bilateral monopoly framework is not appropriate. Their analysis suggests that the profit outcome will depend (all other things being equal) on: a) how anxious a contractor is to participate in a program relative to how anxious the government agency is to have the program executed,' and b) the relative qualities of the information available to each potential contractor and the government concerning the maximum concessions each party is willing to make. These approaches all suggest that the profit outcome is determined by the relative bargaining strengths (eagerness, informa-