<p>Advanced space technology systems often face high fixed costs, can serve limited external demand, and are significantly driven by non-economic motivations. While increased entrepreneurial activity and national ambitions in space have encouraged planners at public space agencies to develop markets around such systems, the very factors that make the recent growth of the space economy so remarkable also challenge planners’ efforts to develop and sustain markets for space-related goods and services. This paper proposes a diagram to visualize the number of competitors a market can sustain as a function of the industry’s cost structure; the distribution of program support across direct purchases, direct investments, and shared infrastructure; and the magnitude of demand external to the program. Applying public goods theory, the diagram shows how marginal dollars invested in shared infrastructure can create non-rival benefits supporting more competitors than direct purchases or subsidies. The diagram is demonstrated with a stylized application inspired by NASA’s Commercial LEO Destinations program. Under conditions consistent with public data, independent stations may generate industry-wide losses of roughly $350 million annually, while shared core infrastructure may enable industry-wide profits of roughly $150 million annually. The choice between shared infrastructure and direct purchases can depend on economic conditions that are outside the agency’s control. Under favorable conditions—e.g., strong demand and low capital costs—direct purchases may suffice to sustain competition. Under challenging conditions—e.g., limited demand or tight capital markets—even well-designed shared infrastructure may prove insufficient to sustain competition.</p>

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Public infrastructure investments for space market development

  • Akhil Rao

摘要

Advanced space technology systems often face high fixed costs, can serve limited external demand, and are significantly driven by non-economic motivations. While increased entrepreneurial activity and national ambitions in space have encouraged planners at public space agencies to develop markets around such systems, the very factors that make the recent growth of the space economy so remarkable also challenge planners’ efforts to develop and sustain markets for space-related goods and services. This paper proposes a diagram to visualize the number of competitors a market can sustain as a function of the industry’s cost structure; the distribution of program support across direct purchases, direct investments, and shared infrastructure; and the magnitude of demand external to the program. Applying public goods theory, the diagram shows how marginal dollars invested in shared infrastructure can create non-rival benefits supporting more competitors than direct purchases or subsidies. The diagram is demonstrated with a stylized application inspired by NASA’s Commercial LEO Destinations program. Under conditions consistent with public data, independent stations may generate industry-wide losses of roughly $350 million annually, while shared core infrastructure may enable industry-wide profits of roughly $150 million annually. The choice between shared infrastructure and direct purchases can depend on economic conditions that are outside the agency’s control. Under favorable conditions—e.g., strong demand and low capital costs—direct purchases may suffice to sustain competition. Under challenging conditions—e.g., limited demand or tight capital markets—even well-designed shared infrastructure may prove insufficient to sustain competition.