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A Physico-Economic Model of Low Earth Orbit Management

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  • Sébastien Rouillon

    (University of Bordeaux)

Abstract

We analyze the externality caused by the accumulation of space debris, focusing on the long-term equilibrium induced by a constant rate of satellite launches. We give conditions such that the long-term population of functioning satellites is an inverted-U shape function of the launch rate. We compare typical ways of managing the orbit. The maximum carrying capacity is the maximum population of satellites that the space sector can sustain in the long run. The physico-economic equilibrium occurs under open-access to the orbit. The optimal policy maximizes the present value profit of the space sector. Finally, we discuss the use of standard economic instruments (command-and-control, tax and market) to regulate space activity in order to achieve an optimal outcome. A numerical application based on a realistic calibration illustrates all results.

Suggested Citation

  • Sébastien Rouillon, 2020. "A Physico-Economic Model of Low Earth Orbit Management," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 695-723, December.
    • Handle: RePEc:kap:enreec:v:77:y:2020:i:4:d:10.1007_s10640-020-00515-z
    DOI: 10.1007/s10640-020-00515-z
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    References listed on IDEAS

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    1. Richard Klima & Daan Bloembergen & Rahul Savani & Karl Tuyls & Daniel Hennes & Dario Izzo, 2016. "Space Debris Removal: A Game Theoretic Analysis," Games, MDPI, vol. 7(3), pages 1-18, August.
    2. Rao, Akhil & Burgess, Matthew & Kaffine, Daniel, 2020. "Orbital-use fees could more than quadruple the value of the space industry," MPRA Paper 112708, University Library of Munich, Germany.
    3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    4. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 9, pages 178-203, Palgrave Macmillan.
    5. Adilov, Nodir & Alexander, Peter J. & Cunningham, Brendan M., 2018. "An economic “Kessler Syndrome”: A dynamic model of earth orbit debris," Economics Letters, Elsevier, vol. 166(C), pages 79-82.
    6. Victor dos Santos Paulino & Gaël Le Hir, 2016. "Industry structure and disruptive innovations: the satellite industry," Journal of Innovation Economics, De Boeck Université, vol. 0(2), pages 37-60.
    7. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62(2), pages 124-124.
    8. Matthew Weinzierl, 2018. "Space, the Final Economic Frontier," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 173-192, Spring.
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    Cited by:

    1. Julien GUYOT & Sébastien ROUILLON, 2021. "Designing satellites to cope with orbital debris," Bordeaux Economics Working Papers 2021-16, Bordeaux School of Economics (BSE).
    2. Aditya Jain & Akhil Rao, 2022. "International cooperation and competition in orbit-use management," Papers 2205.03926, arXiv.org, revised Sep 2022.
    3. Adilov, Nodir & Alexander, Peter J. & Cunningham, Brendan M., 2023. "The economics of satellite deorbiting performance bonds," Economics Letters, Elsevier, vol. 228(C).
    4. Bernhard, Pierre & Deschamps, Marc & Zaccour, Georges, 2023. "Large satellite constellations and space debris: Exploratory analysis of strategic management of the space commons," European Journal of Operational Research, Elsevier, vol. 304(3), pages 1140-1157.
    5. Martin Stuermer & Maxwell Fleming & Ian Lange & Sayeh Shojaeinia, 2023. "Growth and Resources in Space: Pushing the Final Frontier?," Working Papers 2023-02, Colorado School of Mines, Division of Economics and Business.
    6. Bongers, Anelí & Torres, José L., 2023. "Orbital debris and the market for satellites," Ecological Economics, Elsevier, vol. 209(C).
    7. Akhil Rao & Francesca Letizia, 2022. "An integrated debris environment assessment model," Papers 2205.05205, arXiv.org.

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