Premium
LEFT FOR DEAD: ANTI‐COMPETITIVE BEHAVIOR IN ORBITAL SPACE
Author(s) -
Adilov Nodir,
Cunningham Brendan M.,
Alexander Peter J.,
Duvall Jerry,
Shiman Daniel R.
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12790
Subject(s) - depreciation (economics) , incentive , monopoly , economics , competition (biology) , microeconomics , space (punctuation) , industrial organization , investment (military) , marginal cost , duration (music) , business , monetary economics , computer science , profit (economics) , ecology , financial capital , politics , political science , law , capital formation , biology , operating system , art , literature
In a dynamic investment framework with depreciation, we show incumbent satellite operators have incentives to “warehouse” a fraction of their assigned spectrum and orbital slots, keeping nonoperational assets in place, which reduces output, increases prices, and diminishes social welfare. Exploring three distinct market structures, we model firms' incentives to warehouse, and show conditions under which firms choose to warehouse rather than replace nonfunctioning satellites. We find a dominant firm with a competitive fringe produces more and longer duration warehousing relative to perfect competition or monopoly. Regulators could remediate warehousing by increasing a firm's marginal costs, or by increasing the probability of reallocating orbital slots that do not have a fully functioning satellite. ( JEL L9, L5)