Opportunity Costs Drive the Market Price of Starship Launches

Scale model of Starship first stage in a wind tunnel at NASA Ames. Credit: NASA

Title: Opportunity Costs Drive the Market Price of Starship Launches

Author(s): Akhil Rao and Tom Colvin

Publisher: Rational Futures

Publication Date: May, 2025

Link: Download

This paper addresses a gap in the ability of the space community to make economically defensible estimates for the price of emerging goods and services. Specifically, most estimates we have seen for future prices do not account for the potential effects of opportunity costs or market competition. Opportunity cost measures the forgone profit from taking one action instead of another. To illustrate the importance of these factors, we use the Starship and Starlink vehicles being developed by SpaceX as a case study.

Highlights

  • Opportunity costs drive prices. When a satellite constellation is tied to a launch vehicle, the constellation’s profitability will drive the market price of the launcher’s services. The profit of launching a satellite from the market should be greater than the profit of deploying the launch company’s own satellites.
  • Higher Starlink profits imply higher Starship prices. Elon Musk has estimated that annual revenues for Starlink may be $30 billion to $50 billion. If these revenues can be realized, the implied price of Starship is $120 million to $320 million per launch, respectively. Charging less would lead to reduced funds for shareholders or for internal programs focused on Mars.
  • Excess Starship capacity may reduce price somewhat. Starship launches may be relatively scarce for the first few years of operation, constrained to 145 annually according to regulatory filings. If there is excess launch supply, Starship prices should be around the price of the nearest competitor. SpaceX has little incentive to price Starship at its cost of hardware and operations.
  • The future of launch prices is uncertain. Satellite constellations integrated with launch vehicles may actually drive the market price of launches up, not down.