Competition, Procurement and Learning-by-Doing in the Space Launch Industry

Abstract

We estimate a dynamic model of the U.S. space launch industry. The model allows past launches to improve rocket reliability and lower launch costs. It also allows the government to make forward-looking procurement choices. We use the model to analyze policy-relevant issues in the recent history of the industry: the 2006 United Launch Alliance “merger-to-monopoly” and the effects of efficiencies in the form of learning synergies; innovations, such as SpaceX’s Falcon 9 and ULA’s recent introduction of Vulcan Centaur; the costs and benefits of forward-looking procurements; and, the trade-offs between the advantages of centralized control and possible inefficiencies.