More Than a Wing and a Prayer: Government Indemnification of the Commercial Space Launch Industry
AbstractUsing rockets to launch communications satellites and other spacecraft poses risks to the uninvolved public, including persons and property under the flight path of the launch vehicle. The federal government plays a pivotal technical role during the actual launch by carrying out certain risk-related procedures, thus causing third-party risk to be jointly produced by the company and the government. In addition, under the Commercial Space Launch Act, the government partially indemnifies commercial launch companies for third-party damages. We compare the indemnification policy to optimal liability rules under public-private co-production of risk. Under modest assumptions, shared liability created by the indemnification rules decreases the incentive of both parties to take care relative to the optimum. If care were observable, it would be preferable for the government to fully indemnify companies that take due care. The role of the government as an agent for third parties may qualify these findings.
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Bibliographic InfoPaper provided by UMBC Department of Economics in its series UMBC Economics Department Working Papers with number 09-112.
Length: 29 pages
Date of creation: 01 Sep 2009
Date of revision: 01 Sep 2009
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Postal: UMBC Department of Economics 1000 Hilltop Circle Baltimore MD 21250, USA
Web page: http://www.umbc.edu/economics
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Other versions of this item:
- Brennan, Timothy J. & Kousky, Carolyn & Macauley, Molly K., 2009. "More Than a Wing and a Prayer: Government Indemnification of the Commercial Space Launch Industry," Discussion Papers, Resources For the Future dp-09-38, Resources For the Future.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
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