Left for Dead: Anti‐Competitive Behavior in Orbital Space

13 Pages Posted: 22 May 2019

See all articles by Nodir Adilov

Nodir Adilov

Purdue University Fort Wayne

Brendan Michael Cunningham

U.S. Naval Academy; Eastern Connecticut State University

Peter J. Alexander

Federal Communications Commission

Jerry B. Duvall

U.S. Federal Communications Commission (FCC); Phoenix Center for Advanced Legal & Economic Public Policy Studies

Daniel R. Shiman

Federal Communications Commission (FCC)

Date Written: July 2019

Abstract

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 Classification: L9, L5

Suggested Citation

Adilov, Nodir and Cunningham, Brendan Michael and Cunningham, Brendan Michael and Alexander, Peter J. and Duvall, Jerry B. and Shiman, Daniel R., Left for Dead: Anti‐Competitive Behavior in Orbital Space (July 2019). Economic Inquiry, Vol. 57, Issue 3, pp. 1497-1509, 2019, Available at SSRN: https://ssrn.com/abstract=3392592 or http://dx.doi.org/10.1111/ecin.12790

Nodir Adilov (Contact Author)

Purdue University Fort Wayne ( email )

2101 E. COLISEUM BLVD, NH 260C
FORT WAYNE, IN 46805
United States
2604816497 (Phone)

Brendan Michael Cunningham

U.S. Naval Academy ( email )

Department of Economics
589 McNair Road
Annapolis, MD 21402
United States
410-293-6894 (Phone)
508-302-2596 (Fax)

Eastern Connecticut State University ( email )

Willimantic, CT 06226
United States

Peter J. Alexander

Federal Communications Commission ( email )

Washington, DC 20554
United States

Jerry B. Duvall

U.S. Federal Communications Commission (FCC) ( email )

445 12th Street SW
Rm. TW-B204
Washington, DC 20554
United States

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Daniel R. Shiman

Federal Communications Commission (FCC) ( email )

445 12th Street SW
Washington, DC 20554
United States

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