The Arms Trade and Arms Control

This paper constructs a dynamic model of the arms trade in which there are a small number of suppliers who care about the profits from the trade and the security consequences of the sale; and a large number of interacting buyers who are concerned about their security relative to regional rivals. We derive the equilibrium under a number of assumptions about market structure. This model is then used to evaluate the benefits and sustainability of a proposed arms control regime which involves establishing a cartel of suppliers, taxing arms exports and distributing the proceeds to recipients.