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Market Power in Uranium Enrichment

Listed author(s):
  • Geoffrey Rothwell

    (Department of Economics, Stanford University)

Four firms dominate the international uranium enrichment market. Two reasons for this industrial concentration are (1) enrichment capacity can be used to make nuclear weapons, and hence its spread has been controlled through many mechanisms, including technology classification, and (2) increasing returns to scale. Historically, strong increasing returns to scale in gaseous diffusion technology development and commercialization prevented non-nuclear weapons states from considering uranium enrichment. Later, gas centrifuge technology allowed new entrants to build commercially competitive enrichment plants at much smaller sizes than diffusion technology and at a fraction of the electricity cost. At the same time, the nations that privatized or host privately-owned enrichment facilities have strongly discouraged others from developing enrichment capacity. Therefore, these firms have been benefiting from the exercise of national power to prevent entry into this market. Had there been no control on enrichment capacity, the uncompetitive diffusion capacity could have been retired and the market price could have been lower. Further, non-proliferation is not these firms’ primary mission. In situations like this, firms are usually regulated or nationalized, because free markets do not necessarily lead to the socially optimal level of concentration and diversity in supply.

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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-032.

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Date of creation: Mar 2009
Handle: RePEc:sip:dpaper:08-032
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