More than a Wing and a Prayer: Government Indemnification of the Commercial Space Launch Industry

30 Pages Posted: 28 Sep 2009

See all articles by Tim Brennan

Tim Brennan

University of Maryland, Baltimore County - Department of Public Policy; Resources for the Future

Carolyn Kousky

Resources for the Future

Molly K. Macauley

Resources for the Future

Date Written: September 28, 2009

Abstract

Using 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.

Keywords: government indemnification, liability, insurance, space transportation

JEL Classification: L51, L98

Suggested Citation

Brennan, Tim and Kousky, Carolyn and Macauley, Molly K., More than a Wing and a Prayer: Government Indemnification of the Commercial Space Launch Industry (September 28, 2009). RFF Discussion Paper No. 09-38. Available at SSRN: https://ssrn.com/abstract=1479651 or http://dx.doi.org/10.2139/ssrn.1479651

Tim Brennan

University of Maryland, Baltimore County - Department of Public Policy ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States
410-455-3229 (Phone)
410-455-1172 (Fax)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Carolyn Kousky (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Molly K. Macauley

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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