Monopolistic Competition in a Limited Orbital Space

In a context of intense competition for access to the Earth's orbit, we study a model of monopolistic competition in which satellites operators diversify the variety of satellite services. We put this in perspective with the accumulation of in-orbit fragment debris and the risk it poses for the sustainability of orbital activity. Monopolistic competition leads to a sub-optimal outcome, in terms of both the number of satellites in orbit and the range of services offered. We show that monopolistic competition results in excessive orbit congestion, when Earth's orbit carrying capacity is low and/or consumers' preference for diversity is low, and always leads to an insufficient number of satellite services being offered. However, a strong consumers' preference for service diversity, as it increases the market power of satellites operators, can mitigate congestion of the Earth's orbit. Finally, we identify a pair of economic instruments capable of correcting these market failures and decentralizing an optimal state.