Public Infrastructure Investments for Space Market Development

TL;DR

This paper introduces a graphical framework to analyze how public investments in space infrastructure can foster market development by balancing costs, government support, and demand, demonstrated through a NASA-inspired case study.

Contribution

It presents a novel graphical framework based on public goods theory to evaluate public infrastructure investments for space markets, highlighting their role in enabling industry growth.

Findings

Shared infrastructure can generate more non-rival benefits than direct subsidies.

Under certain conditions, shared infrastructure can lead to industry-wide profits.

Independent stations may cause industry losses without shared infrastructure.

Abstract

Advanced space technology systems often face high fixed costs, can serve limited non-government demand, and are significantly driven by non-market 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. I propose a graphical framework to visualize the number of competitors a market can sustain as a function of the industry's cost structure; the distribution of government support across direct purchases, direct investments, and shared infrastructure; and the magnitude of non-government demand. Building on public goods theory, the framework shows how marginal dollars invested in shared infrastructure can create non-rival benefits supporting more competitors per dollar than direct purchases or subsidies. I demonstrate the framework with a stylized application inspired by NASA's Commercial LEO Destinations program. Under cost and demand conditions consistent with public data, independent stations generate industry-wide losses of \$355 million annually, while shared core infrastructure enables industry-wide profits of \$154 million annually. I also outline key directions for future research on public investment and market development strategies for advanced technologies.