，
，
，
Basic Courses Department, Military Economics Academy, Wuhan, China
(tdaiwa@126.com)
Abstract - With the rapid development of modern science and technology, equipment construction plays an increasingly active role in Chinese military modernization construction. Given the limited funds input in the military equipment and the pressing need to strengthen the funds management, the paper analyzes the game process of the new technical equipment procurement and put forwards some scientific suggestions, which helps to win a priority, improve the benefits in the procurement game, and finally realize the optimization of the source distribution.
Keywords - new technology, equipment, procurement, game
I. INTRODUCTION
Equipment construction plays an increasingly active role in Chinese military modernization construction With the rapid development of modern science and technology.
Equipment procurement, the critical link in the entire life cycle of weapon equipment, is restrained by equipment funds input and benefits [1] . Serious contradiction between military expenditure and demand leads to limited funds pouring into equipment construction. Given this condition, strengthening the management of the funds and analyzing the Procurement Process of the new technical equipment help to win a priority and improve the benefits in the procurement game [2] [3] .
Equipment purchase expenditure is the money the purchaser pays the supplier for the equipment [4] . For the convenience of expression, Party A and Party B may be applied somewhere in the following text to represent the purchaser and the supplier respectively. Party A expects to purchase the equipment they need as cheaply as possible, while Party B hopes to sell it at the best possible price.
Then the contradiction between the two Parties appears, namely, each Party becomes one of the main roles in the game of business or bargaining [5] [6] .
The following three circumstances usually occur during the process of equipment procurement: ① mature technology of producing equipment and a single supplier;
②
mature technology of producing equipment and more than one suppliers;
③
immature technology of producing equipment and no available supplier. Under the first two circumstances, the essence of the concern both parties focus on is price [7] . This article highlights the third circumstance, under which, not only price but also risk control should be seriously considered. Lacking mature technology, the supplier need to pour an amount of money into research. there is some uncertainty about how much money should be poured into research, whether the new equipment can be developed, and if so, whether the function of the newly-developed equipment meet the requirement of the purchaser. So given this condition, The procuring behavior of the purchaser can also considered as the venture investment.
II. THE MODEL OF NEW TECHNICAL EQUIPMENT
PROCUREMENT
The major problem of new technical equipment procurement lies in the uncertainty of its development and manufacture [8] . And for military purchasers and the new equipment suppliers, this uncertainty is characterized by the difficulty of conquering new technology. Different difficulty leads to different developing costs, which can not be confirmed before the procurement contract is signed, but its probabilistic distributions can be estimated [9] . The concrete costs the new technical equipment developer (Party B) pay out is their privacy. So for the good of the company, they always claim their high technical difficulty leads to high costs even with low technical difficulty and low costs. Then it is so difficult for the purchaser( Party A) to judge whether the cost information form Party B is true. But Party A can choose different quantity of the purchase, also their own privacy, to avoid the moral risk of Party B.
Suppose both parties have to reach an agreement in the purchase and sale contract that the price under high technical difficulty is difficulty the price is
P h
P l
, and under low technical
. Then under high technical difficulty, the marginal cost of Party B is
C h
, and purchase quantity of Party A is
Q h
; under low technical difficulty the marginal cost of Party B is
C l
, and purchase quantity of Party A is
P h

C h
, P l

C l
, Q l
Q l

. And,
Q h
Here,
C h and
C l
represent the privacy of Party B
， which are the fixed values, while
Q h
and
Q l
are variables in the free charge of A, which has to become fixed after the contract is signed to facilitate the development process of Part B. So before signing the contract, Party A is expected to fix the values of
Q h
and
Q l
under the condition of both the high and low technical difficulties.
There exists the moral risk that Party B may present the low technical difficulty as high one and vice versa.
And at the same time, Party A may present the high quantity as low one and vice versa [10] .

Party A, who has the last word on quantity of the purchase, is aiming at purchasing the equipment they need as cheaply as possible, while Part B, who has the last word on the price, is hoping to sell the newly developed technical equipment at the best possible price.
That is to say, Party A pursues minimizing the average cost of the equipment purchase, while Party B pursues maximizing the selling profits. And the gain matrix game is shown in the following table:
Table I gain matrix of new equipment game based on high technical difficulty I
In this table, there is no difference to Party A whichever quotation Party B chooses. However, Party A prefers low quantity given the high quotation, and prefers high quantity given low quotation. In order to identify the difference in this preference, the matrix in the table should be modified as follows:
Table II gain matrix of new equipment game based on high technical difficulty II
According to the table2, expecting to get the low price, all Party A could do is to force Party B to take the initiative in choice of low quotation. The quotation Party
B chooses depends on the their possible profits, which is clearly shown as follows:
Q h
Q l
( P h
( P h

C h

C h
)
)


Q h
Q l
( P l
( P l

C h
)

C h
)
So, whatever choice Party A makes, Party B will inevitably choose to quote high price, and there is nothing party A can do to force Party B into preferring low quotation. That is to say, game equilibrium will be reached under the condition that Party A requires low quantity and Party B presents high quotation.
Under the circumstances of low technical difficulty, gain matrix game is shown in the following table.
Like the game of new equipment based on high technical difficulty, this game is also equilibrated under the condition that Party A requires low quantity and Party
B presents high quotation.
Table III gain matrix of new equipment game based on low technical difficulty
The main reason why both games are equilibrated based on the same condition is that whatever choice Party
A makes, Party B inevitably chooses high quotation which is beneficial. Namely, high quotation is the dominant strategy of Party B and low quotation is his strict dominated strategy.
Under the condition of high technical difficulty, if
P l

C h
, Q l
( P l

C h
)

Q h
( P h

C h
)
, the disequilibrium game point that Party A requires high quantity and Party B presents low quotation:
(

P l
 
, Q l
( P l

C h
))
, is strictly superior to the equilibrium game point that Party A requires low quantity and
(

P h
 
Party B presents
, Q h
( P h

C h
)) high quotation:
. Then, the game between both parties get stuck in the “prisoner's dilemma”, which stems from the fact that Part B always pursue the optimal profit which is however considered the worst to Party A, who has to choose the suboptimal point to improve the unfavorable condition, so does Party B, and subsequently both sides are bound to reach a suboptimal equilibrium rather than optimal equilibrium which is unstable.
The same analysis is also applicable to the purchase of new technical equipment under the condition of low technical difficulty.
To avoid “prisoner's dilemma” and arrive in the optimal condition, both parties may reach an agreement beforehand and may sign the following two contracts:
①
The quotation of Party B is P h
while the purchase quantity of Party A is Q h
;
②
The quotation of Party B is
P l
while the purchase quantity of Party A is Q l
. And
Party B is allowed to choose either of two, at the same time, Party A may make a promise during the game that
Party A does choose low quantity if Party B prefers high quotation and vice versa. This promise is made by Party A without risk, just conveying the message to Party B that those who reap profits at the expense of others will end up ruining themselves.
III CONCLUSIONS
Whether the procurement price is accurate and rational is closely related to the improvement of military equipment and the benefits of military expenditure on equipment purchase [11] . Therefore, new technical equipment procurement seems especially important that it is urgent to win a priority and improve the benefits in the procurement game, though the optimal equilibrium is not stable, which promotes a pressing need to take specific measures as follows:

A. Measures from a macroscopic point of view
Firstly, Equipment procurement rules should be gradually improved based on the administrative rules of military equipment procurement expenditure and some related administrative regulations on military product price, to form a comprehensive system of laws and regulations on equipment procurement management, ensuring that there are laws to go by and rules to obey [12]
[13] .
Secondly, the building of procurement team, the scientific group, should be strengthened to make every talent of it be good at price review work, understanding both techniques and finance [14] .
B. measures from a microscopic point of view
On the one hand, given many related links and departments involved in the equipment procurement, purchasers should build up the sense of responsibility to deal well with and strengthen all kinds of relationships [15] .
On the other hand, purchasers should make a good job of price review work, which requires them to actively focus on or participate in scientific research, gaining an adequate understanding of the details (quality, performance, design, material, manufacture, etc.) of the equipment to accumulate some related information, and also pushes them to get acquainted with the critical information (business concepts, pricing strategy, foaming quotes, rational price, etc.) of the suppliers to make a good preparation for the subsequent work [16] [17] . All the measures mentioned above, if taken completely, can not only effectively prevent the suppliers exaggerating the equipment cost but also give firm guarantee for a rational quotation and an effective procurement contract.
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