An optimal control model of new weapon system development∗

How should modeling and simulation be used to support defense acquisition?

“…• If the contractor agent and the government principal have asymmetric information regarding production costs, and additional R&D reduces actual production costs against a fixed contract price, the contractor has incentives to invest more R&D "up front" to realize these rents (Laffont and Tirole 1993). • If the government can require the contractor to allocate resources over time to minimize the total procurement costs of the system, it will be optimal to undertake most R&D early in the procurement program (Cavin 1991). This paper adopts an economic model of R&D profiles for defense systems based on system cost minimization, which was described previously in this journal (Cavin 1991).…”

“…• If the government can require the contractor to allocate resources over time to minimize the total procurement costs of the system, it will be optimal to undertake most R&D early in the procurement program (Cavin 1991). This paper adopts an economic model of R&D profiles for defense systems based on system cost minimization, which was described previously in this journal (Cavin 1991). Let C(Y,K) represent the cost of producing the system at a rate Y using technology investment K, and suppose that the specific technology required to build a defense system can be produced using traditional R&D and modeling and simulation jointly.…”