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\emailauthor{dongjic@ucas.ac.cn}{Jichang Dong}
\emailauthor{jcdonglc@ucas.ac.cn}{Jichang Dong}
\emailauthor{jingyihan18@mails.ucas.ac.cn}{Yihan Jing}
\emailauthor{ dongciwei@zuel.edu.cn}{Ciwei Dong}
\emailauthor{hezhou@ucas.ac.cn}{Zhou He\corref {Cor}}
\emailauthor{ dongciwei@zuel.edu.cn}{Ciwei Dong}
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@ -206,6 +198,7 @@
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\begin{frontmatter}
\title{How to empower insured satellite launch supply chain: government subsidy or blockchain adoption?}
\title{How to empower commercial satellite launch supply chain: Insurance, government subsidy or blockchain adoption?}
\author[SEMUCAS]{Jichang Dong}\ead{jcdonglc@ucas.ac.cn}
\author[SEMUCAS,SDCUCAS,BDCAS]{Yihan Jing}\ead{jingyihan18@mails.ucas.ac.cn}
\author[ZNU]{Ciwei Dong}\ead{ dongciwei@zuel.edu.cn}
\author[SEMUCAS,BDCAS,MOECAS]{Zhou He\corref{Cor}}\ead{hezhou@ucas.ac.cn}
\author[ZNU]{Ciwei Dong}\ead{ dongciwei@zuel.edu.cn}
\address[SEMUCAS]{School of Economics and Management, University of Chinese Academy of Sciences, 3 Zhongguancun Nanyitiao, China}
\address[SDCUCAS]{Sino-Danish College, University of Chinese Academy of Sciences, 80 Zhongguancun East Road, Beijing 100190, China.}
\address[ZNU]{School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China}
\address[SDCUCAS]{Sino-Danish College, University of Chinese Academy of Sciences, 80 Zhongguancun East Road, Beijing 100190, China.}
\address[BDCAS]{Key Laboratory of Big Data Mining and Knowledge Management, Chinese Academy of Sciences, 80 Zhongguancun East Road, Beijing 100190, China.}
\address[MOECAS]{MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS, 3 Zhongguancun Nanyitiao, China}
\address[ZNU]{School of Business Administration, Zhongnan University of Economics and Law, Wuhan 430073, China}
\cortext[Cor]{Corresponding author. Tel.: +86 10 88250000; fax: +86 10 88250000.}
\begin{abstract}
% problem definition: what is the business problem
The commercial launch industry is booming but abounds with enormous-loss risks, similar to the disruption risk in the supply chain.
Traditionally, launch insurance is the commonly used financial tool to hedge such risks.
However, as the third highest cost after the satellite cost and the launch service price, the insurance makes satellite operators prohibitive.
Moreover, to alleviate the financial pressure on private satellite operators, some governments have implemented subsidy systems for the launch insurance fee to promote the development of the commercial space industry.
Besides, with the development of blockchain technology, it has also been adopted to decrease launch risks and expand the market from a technical perspective.
However, a tricky question is how to make a cost-effective decision to improve the supply chain efficiency between government-subsidy insurance and blockchain-embed insurance.
% Academic /Practice relevance: what have others done
In this paper, we apply a game-theoretic approach to study the fintech launch contract supported by government subsidy or blockchain for solving the trade-off between high risk and high cost.
More precisely, we consider a Stackelberg strategy in a space launch supply chain and build math models to examine the cases with launch insurance (Model I), with government-subsidies insurance (Model IG), with blockchain-embedded insurance (Model B), and with blockchain-embedded insurance under government subsidies (Model BG).
From a theoretical perspective, we investigate the optimal launch price, retail price, and the effort (for improving launch success probability) expressions by deriving models.
The commercial launch industry is booming with possible launch failures, which can cause enormous loss for both vehicle manufacturer and satellite operator.
To hedge such risks and reduce potential costs, they often buy launch insurance from financial companies, and/or seek possible subsidy from government-backed schemes.
Recently, the innovative blockchain technology has been adopted by satellite launch supply chains to enhance data sharing, improve workflow efficiency, and thus reduce launch risks.
However, very little research has been done on how these players interact, make decisions, and how the satellite launch supply chain (SLSC) can be empowered by insurance, government subsidy or blockchain adoption.
In this paper, we propose several Stackelberg games to examine the SLSC cases with launch insurance (Model I), with insurance \& government subsidies (Model IG), with blockchain-embedded insurance (Model B), and with blockchain-embedded insurance \& government subsidies (Model BG).
We investigate the optimal launch price, retail price, and the effort (for improving launch success probability) expressions by deriving models.
Furthermore, we explore the conditions for optimal allocation of government subsidies and the cost thresholds for adopting blockchain technology by analyzing the equilibrium outcomes.
We find that if the government wants to form a virtuous circle and optimize the allocation of funds, it should subsidize satellite operators that use cost-effective vehicles for launch activities rather than providing unconditional subsidies.
In addition, we also find that the subsidy does not benefit consumers, but blockchain can.
@ -166,197 +160,135 @@
\section{Introduction}\label{sec:introduction}
\subsection{Background}
% 商业卫星行业的兴起。商业航空越来越重要。
% With the prosperity of commercial space, more and more
% The global space economy is growing. Governments around the world are realising the potential the space industry could be bringing into their respective economies. An exceptional amount of capital is being invested both by governments and the private sector.\par
% With commercial passenger sub-orbital launches imminent, human spaceflight will become more commonplace. The “NewSpace” arena also has projects ranging from active debris removal and artificial shooting stars missions to lunar gateway and space hotel concepts as well as human lunar and Mars missions.\par
% Space insurance has always been an enabler of new projects, providing both hull and liability coverages. Despite the market and technical challenges, space insurers will continue to support the industry going forward.\par
Due to Earth’s insatiable need for information and communication, the artificial satellite industry is booming.
The ability of satellites to collect signals and data extensively, even from places hard to reach, allows for a variety of functions such as providing satellite telecommunication, satisfying weather and climate monitoring, supporting satellite television (BskyB, Direct TV, SkyTV and Dish), meeting Global Positioning System (GPS) needs, and serving for military and scientific.
Since the 1980s, with the privatization of telecommunication organizations as well as the development of space laws and regulatory regimes, commercial space has begun to sprout \citep{OECD2014}.
Furthermore, SpaceX Falcon 9 delivering the SES-8 satellite into orbit marks on Dec.3th, 2013, marks the rise of the private space launch market \citep{spacex}.
Space is no longer confined to government and military agencies like NASA and its contractors but expanding rapidly via private commercial companies like SpaceX, Blue Origin, Cloud Constellation Corporation, and more.
% According to \cite{TheSpaceReport2021}, the space economy grew $176\%$ during the last 15 years, reaching $447$ billion dollars in 2020. It is worth noting that $80\%$ of the total income is contributed by the commercial space. In addition, there are more than 1,100 SmallSats launched in 2020, which is twice in average size over the same period.
According to the Satellite Industry Association (SIA), since 2014, the global space industry revenue has continued to grow, and by 2021, the total revenue of the global space industry reaches \$386 billion.
From the perspective of the composition of the global space industry, at present, the development of the global space industry is still dominated by the satellite industry.
Since 2016, the share of the global satellite industry in the space industry has exceeded 70\%.
In 2021, the national satellite industry will account for 72.3\% of the space industry.
Man-made satellites can collect extensive and valuable data which can be used in archaeology, cartography, environmental monitoring, meteorology, and reconnaissance applications.
Space is no longer confined to government and military agencies like NASA, but open to private companies since 1980s, thanks to the changes of space laws and regulatory regime \citep{OECD2014}.
On Dec.3th 2013, the SES-8 satellite was successfully delivered by a Falcon 9 launch vehicle made by SpaceX, a private company founded in 2002 shaking up the competitive satellite launch industry by offering lower cost launches than their competitors \citep{spacex}.
This successful launch significantly promotes the global space industry, the total revenue of which reaches \$386 billion by 2021, according to the Satellite Industry Association \citep{Space2022}.
The commercial satellite industry put a record 1,713 commercial satellites into orbit for the fourth consecutive year, an increase of more than 40\% compared to 2020.
The SIA reported 4,852 satellites orbiting Earth by the end of 2021, an increase of 179 percent over the past five years. \citep{Space2022}.
That means the space launch market gradually plays a pivotal part in modern societies and economic growth.
In parallel, the vigorous development of the space economy also points that the needs of operation management implanting in the space launch market are increasing \citep{Kucukcay}.
%商业航天面临的问题
While the successful SpaceX mission has created new enthusiasm for commercial satellite launching, there are still many risks that should not be ignored in satellite launch services, such as the responsibility of the vehicle, the indicators of the satellite, the condition of the launch activity so on.
In addition, many private investors are hesitant about investing in space businesses because of the costly infrastructure and extended timelines.
From the perspective of private companies, once the launch fails, the loss for both satellite operator and launch servicer is enormous. While governmental and military satellites are usually self-insured, commercial satellite operators often require insurance to be in place.\par
Behind such vigorous development, the launch failure risk can not ignored by the companies in satellite launch supply chain (SLSC).
Once the launch fails, the loss for both vehicle manufacturer and satellite operator is enormous.
To hedge this risk, there are three solutions in practice.
% 解决商业航天风险的一个途径是购买航天保险。
In order to hedge launch risks, space insurance emerged. Insurance companies like Global Aerospace have been providing insurance for space initiatives since the first commercial satellites and launch vehicles required financial support to cover their risk.
New concepts and technologies such as prominent constellations of satellites have distinctive risk profiles requiring unique coverages.
According to the satellite launch project process, space insurance is roughly divided into four types of coverage which reflect the various phases of most satellite projects - pre-launch insurance \footnote{ Pre-launch insurance covers damage to a satellite or launch vehicle during the construction, transportation, and processing phases prior to launch.},
launch insurance \footnote{ Launch insurance covers losses of a satellite occurring during the launch phase of a project. It insures against complete launch failures as well as the failure of a launch vehicle to place a satellite in the proper orbit.},
in-orbit insurance \footnote{In-orbit policies insure satellites for in-orbit technical problems and damages once a satellite has been placed by a launch vehicle in its proper orbit.},
and launch plus life insurance \footnote{Third-party liability and government property insurances protect launch service providers and their customers in the event of public injury or government property damage, respectively, caused by launch or mission failure.}.
The launch insurance is usually the most widely focused \citep{Suchodolski2018} because the launch is the riskiest part of any space activity, and the damage is often catastrophic. \citep{Gould2000, Kunstadter2020}. \par
Concerning about the high premium, some governments have introduced policies to subsidize the commercial industry.
For example, Beijing Bureau of Economy and Information Technology has implemented an subsidy about commercial space launch insurance to support commercial space enterprises to engage in the production and manufacture of vehicles and satellites in Beijing, and encourage commercial space enterprises to establish headquarters, sales and operation in Beijing.
In addition, Russian and Japan also provide government indemnification for the loss of satellite launching activity.
Besides, the UK government invested in launch sites to provide new satellite launch services mentioned in its industrial strategy white paper.
The Unites States not only provided subsidy for launch liability insurance but also awarded the commercial companies directly.
% 除了在金融方面补偿风险外，还可以通过提升技术的方式降低发射失败率。
In addition to compensating for risk financially, reducing the launch failure rate on the technical side is also an available way for commercial space companies.
While commercialized space projects have braved all the challenges, they are still involved in conventional economic models that may hamper their growth and success. Luckily, blockchain technology supports building smart contracts and tracking data, considered a disruptive technology that facilitates data flow.
In the real world, companies are emerging to implementing blockchain technology specifically for space launches, such as SpaceChain, IBM and Cloud Constellation Corporation.
The blockchain is used to deal with the above complexities such as contracts, order tracking, parts assembly, shipments, design and test documents, test results data, near real-time data, workflows for approvals, auditing, launch, and control, which make the project more visible, responsive and mitigate costly interruptions during the launch, in other words, it increases the probability of successful launch \citep{Zheng2021}.
Here are the main features in details of blockchain about supporting space launch:\par
First, space insurance emerged.
Insurance companies like \textit{Global Aerospace} have been providing different space insurance services, which can be roughly divided into four types according to satellite project phases: pre-launch insurance\footnote{ Pre-launch insurance covers damage to a satellite or launch vehicle during the construction, transportation, and processing phases prior to launch.}, launch insurance\footnote{Launch insurance covers losses of a satellite occurring during the launch phase of a project. It insures against complete launch failures as well as the failure of a launch vehicle to place a satellite in the proper orbit.}, in-orbit insurance\footnote{In-orbit policies insure satellites for in-orbit technical problems and damages once a satellite has been placed by a launch vehicle in its proper orbit.}, and launch plus life insurance\footnote{Third-party liability and government property insurances protect launch service providers and their customers in the event of public injury or government property damage, respectively, caused by launch or mission failure.}.
Among them, the launch insurance is most popular because the launch phase is the riskiest activity and the damage is often catastrophic \citep{Suchodolski2018, Gould2000, Kunstadter2020}.
%
% \begin{table}[htbp]
% \scriptsize
% \caption{\label{tab:blockchain features} Features of blockchain about supporting space launch}
% \centering
% \begin{threeparttable}
% \begin{tabular}{c p{0.6\columnwidth}} % lcr: left, center, right
% \toprule
% Features & Details\\
% \midrule
% Responsiveness & It enable intelligent, end-to-end supply chain visibility and transparency which allows participants owning permission to check and record data.\\
Second, the government subsidized.
Since the commercial industry promotes the development of high technologies, some governments have introduced policies to subsidize the SLSC.
For example, the \textit{Beijing Bureau of Economy and Information Technology} subsidized commercial space enterprises that engage in the production and manufacture of vehicles and satellites, and encouraged them to establish headquarters, sales and operation in Beijing.
In addition, the Unites States not only provided subsidy for launch liability insurance but also awarded the commercial companies directly.
(1) Reliability: The verified data on the blockchain launch platform is reliable, which cannot be changed based on decentralizing electronic record-keeping. \par
(2) Efficiency: Blockchain supports the smart contract to build an efficient network between the participants who get a node to share, add and update information.\
% \bottomrule
% \end{tabular}
% \end{threeparttable}
% \end{table}
%
%what is the trade off (the good thing and the bad thing) and what we do
Despite the ideas given above being excellent, both space insurance and blockchain technology are high-cost, which make lots of private space companies hesitate to adopt them.
Considering the trade-off between handling risk and considerable cost, we examine the contract price problem.
From the perspective of operation management, we refer to the participants as supply chain members and simplify the question as a two-echelon supply chain consisting of a satellite operator and vehicle manufacturer who provide the launch service.
We examine how the insurance contract and blockchain technology to help improve the supply chain value and how it affects the contract price in the supply chain.
We consider two modes: 1) the satellite operator contract with the vehicle manufacturer under insurance; 2) the satellite operator contracts with the vehicle manufacturer under blockchain-embedded insurance.
Third, new technology helped.
Blockchain, a disruptive technology that facilitates data sharing and trust building, has been adopted by the SLSC companies, such as \textit{SpaceChain}, \textit{IBM} and \textit{Cloud Constellation Corporation}.
It is used to share the critical data (e.g., contracts, test results) among trusted parties to make the workflow (e.g., approvals, auditing) more efficient and visible, so that the launch failure risk can be reduced as much as possible \citep{Zheng2021}.
Each solution above introduces new entity (insurance company, government, and blockchain service provider) with different interest into the SLSC.
Hence, both the private companies and government are keen to understand the impacts of different solutions on SLSC performance.
\subsection{Research questions and key findings}
This paper aims to study the following research questions (RQ):
RQ1. How to analytically model the interactions among key entities in SLSC, namely vehicle manufacturer (VM), satellite operator (SO) and insurance company (IC)? What is the optimal decision for each entity?
RQ2. How to analyze the impact of government subsidy on the optimal decisions in SLSC?
RQ3. Is blockchain worth adopting to the SLSC? How to understand its impacts on the optimal decisions?
To investigate RQ1, we propose a benchmark model with three entities, called Model I.
This model is extended as Model IG to study RQ2 by considering government subsidy.
Next, the blockchain technology is introduced into both models as Model B and BG.
Comparing the optimal decisions in these four models, we obtain the following results:
Motivated by the application of fintech and the importance of space launching operation management in the real world, we theoretically study the research questions listed below:\par
\begin{enumerate} [(1)]
\item Government subsidies can be used to incentivize SO to pay higher launch prices, so that the VM have the motivation to increase the probability of successful launches, and the overall social welfare (total profit of all players) also increases.
\item The impacts caused by blockchain technology and government subsidy are similar; the difference is threefold: for SO, blockchain adoption (if the cost is low) increases its data retail price and profit; for VM, its profit depends on the cost of blockchain adoption and vehicle manufacturing; for satellite data customer, its surplus increases.
\item @@@ try to add another finding/result. No insurance-related results?
\end{enumerate}
RQ1. How to analytically build the mathematical models under traditional launch insurance, government-subsidy insurance, and blockchain-embedded launch insurance, respectively? How to price the launch service contract for the satellite operator? Furthermore, how to make the optimal decision for the vehicle manufacturer? \par
RQ2. How does the government arrange subsidies? And how does the subsidy affect the optimal decisions?\par
RQ3. When will the blockchain launch platform be feasible and how does it affect the optimal decisions? \par
RQ4. What are the subsidy or blockchain values for the satellite operator, the vehicle manufacturer and customers, respectively?
%When will the presence of the blockchain launch platform achieve a win-win in which both the satellite operator, and the vehicle manufacturer are beneficial?\par
To address the above research questions, we conduct a game-theoretic analytical study by building math models.
By arithmetic derivation and analysis, we obtain the following results:
\begin{enumerate} [(1)]
\item When government subsidies for the selection of satellite operators for low-cost vehicle launches, it helps to form positive feedback in the commercial satellite market,
that is, the satellite vendor is more willing to pay high launch prices, so that the vehicle manufacture have the motivation to increase the probability of successful launches.
\item Once the government subsidy project is launched, the satellite operator will always get more from it than before.
But for the vehicle manufacturer, only when the cost of vehicle is relatively low, his income will increase compared to before; otherwise, he cannot benefit from the subsidy program.
For consumers, there is no change in consumer surplus.
Therefore, the overall social welfare as the sum of the profit of the various subjects will increase.
\item In the blockchain-embedded model, the values that blockchain bring to the optimal decisions are similar to the government subsidy brings.
However, there is one difference to claim that the retail price has been increased and the market demand also increases.
\item Moreover, for the satellite, she will always benefit from the adoption of blockchain if its cost is relatively low.
\item However, the profitable condition for the vehicle to decide whether use the blockchain is not only the cost of blockchain is expensive but also the cost of vehicle manufacturing is low.
\item Significantly, the use of the blockchain launch platform will make the consumer surplus increase no matter in which situation.
\end{enumerate}
%(1) When the anti-risk ability of the satellite operator is enhanced, the profits of both the satellite operator and the vehicle manufacturer will increase.
%Significantly, the implementation of the blockchain launch platform will make this effect more pronounced.
%Moreover, the adoption of blockchain will decrease the threshold of the satellite operator to set the optimal price.
%(2) Particularly, the optimal effort the vehicle manufacturer exert will increase and the contract price as well as the premium rate will decrease with the support of blockchain.
%(3) Via analyzing the value of blockchain, we note that the blockchain launch platform will always benefit the satellite operator no matter how weak her risk resistance is.
%However, it is profitable for the vehicle manufacturer to implement cost-advantage blockchain technology only when the satellite operator has a strong capacity for risk.
@@@carefully enumerate your contributions
The rest of this paper is organized as follows.
\refsec{sec:review} reviews four related research streams.
\refsec{sec:models} establishes the benchmark case with launch insurance (Model I), and introduces government subsidies into an extended case (Model IG).
\refsec{sec:blockchain} examines the impact of blockchain adoption in the SLSC under two scenarios, one with launch insurance (Model B) and one with government-subsidized launch insurance (Model GB).
\refsec{sec:extensions} relaxes some assumptions to generate new findings.
\refsec{sec:conclusions} concludes this paper and suggests potential topics for future research.
\section{Literature review}\label{sec:review}
Our paper is closely related to four research streams: supply chain insurance, space supply chain management, blockchain and, government subsidies. We review them as follows and list the differences between our work and existing literature at the end of each subsection.
Our paper is closely related to four research streams: supply chain insurance, space supply chain management, blockchain, and government subsidies.
\subsection{Supply chain insurance}
Supply chain insurance is a sub-stream of supply chain finance which is extensively studied in today's FinTech era \citep{Zhao2015,Xu2018,Wang2021b}.
At an affordable expense, supply chain insurance hedges against the risks caused by internal (e.g., the interruption of funds, and the disruption of logistic) or external (e.g., extreme weather, COVID-19 pandemic) factors \citep{Sodhi2012a, Heckmann2015}.
According to the type of risks @@@ (what kind of types?), the literature on supply chain insurance can be divided into two categories.
(1) Combining insurance contracts with supply chain contracts.
For example, \citet{Lin2010} compared insurance contract with revenue sharing contract according to different agents' risk aversion based on the news-vendor model.
Besides, \citet{Wang2021} also discussed which contract is better for supply chain partners between the advanced payment contract, penalty contract, and time insurance contract in the express delivery supply chain.
(2) Trade-off between costly commercial insurance and substantial economic losses.
For example, \cite{LodreeJr2008} designed an insurance policy framework to quantify the risks and benefits. \cite{Yu2021} considered the interrupt probability of the supply chain, and illustrate that business interruption insurance increases the profit of each participant.
\cite{Brusset2018} constructed a weather index, so that entrepreneurial risk can be transferred to other risk-takers through insurance or options contracts.
\subsection{Space supply chain management}
Space supply chain management can be viewed as a part of space operations.
In the early stage, this research stream generally focused on space logistics, e.g., developing an integrated space supply chain management framework \citep{MIT}.
\cite{Taylor2006} aimed to optimize delivery operation @@@ use what kind of method?
According to the research goal, the literature on space supply chain management can also be divided into two categories.
(1) Optimizing the operating system to improve the efficiency.
\cite{Galluzzi2006} regarded supply chain management as a critical piece of framework in the aerospace industry, and they elaborated the pattern operation in this area.
\cite{Taylor2006} also designed and evaluated the operating system in the space supply chain, but they primarily engaged in optimizing delivery operation, which sustains the exploration initiative.
Moreover, \cite{Gralla2006} gave a comprehensive model and simulation of the supply chain management implemented in the aerospace industry, which is low-volume and schedule-driven compared to the high-volume and market demand-driven SCM in the commercial sector.\par
(2) analyzing the business problem in supply chain management. The research on this topic is relatively few.
\cite{Wooten2018} examined the space industry's operation management, which involves manufacturing operations, supply chain management, and sustainable operations. Besides, they also outlined the challenges and essential questions related to stakeholders.
\cite{Raghunath2021} discussed the challenges that commercial space operation faces from a business perspective.
Furthermore, \cite{Guo2021} comprehensively analyzed the global aerospace industry's current situation and future development from the upstream supply chain, midstream production chain, and downstream application chain.
In addition, \cite{Donelli2021} considered the profitability and efficiency during the aircraft manufacturing and supply chain. The paper proposed a model-based approach to optimal the multiple-choice.
Furthermore, \cite{Dewicki} also based on operational management analyze the business model in commercial space. \par
As review literature, most papers target SCM in space give the mathematical model from optimizing logistics, even the system flow. While our paper builds models from the business angle, we concentrate on the game theory between participants during the launch activity.
\subsection{Blockchain technology support supply chain management}
As a “trust ledger”, blockchain has overwhelming advantage of data storage such as openness, transparency, tampering, and traceability, which make it possible to manipulate higher quality data \citep{Choi2019}, improving the supply chain efficiency and so on \citep{Chod2020}.
According to its characters, \cite{Queiroz2019,Wang2019,Babich2020, Li2022} gave the review of this topic.\par
Besides, more and more scholars have begun to study the application of blockchain in the supply chain.
(1) Inside the supply chain, (i) in upriver, blockchain technology facilitates the flow of raw materials from the suppliers \citep{ Naydenova2017, Nash2016};
(ii) in the midstream, it promotes the exchange of manufacture information and design smart contracts between participants in the supply chain upstream and downstream and achieve coordination eventually \citep{Moise2018, Hilary2022, Chod2020,Korpela2017,Wang2021a}.
(2) Outside the supply chain,
(i) face the third party, it provides an innovative way for the capital constraint companies to finance \citep{Choi2020,Choi2021};
(ii) face the market, it helps products to fight counterfeits, earn trust of customers and win company reputation in the market \citep{Pun2021, Shen2021,Fan2020}.\par
Regarding our topic, this article mainly refers to articles on the application of blockchain in the space supply chain.
\cite{Adhikari2020} gave a clearly analysis on the implementation of blockchain in the area of space cybersecurity framework against global positioning system spoofing.
\cite{Zheng2021} studied a three-tier space supply chain under the decision-making problem and investigated how blockchain technology optimizes decisions based on information sharing.
Moreover, \cite{HylandWood2020} examined three potential blockchain properties applied in space: real-time communication during the interplanetary space operating and operations realm of the solar system.
However, different from them, this article's focal point is on launching a service supply chain supported by fintech ( blockchain-embedded insurance) to facilitate launching risks and contract pricing.
\subsection{Government subsidies}
\subsection{Supply chain insurance}
Our paper is closely related to the topic of insurance adopted to manage disruptive risk, which is a stream of supply chain finance.
For a comprehensive overview, we refer readers to read \cite{Wang2021b}, \cite{Chakuu2019}, \cite{Xu2018}, \cite{Gelsomino2016}, \cite{Zhao2015}, and \cite{Gomm2010}.
As a financial derivative instrument of risk aversion, insurance contracts can be seen as hedging at the expense of current profits and improving the risk tolerance by compensating the economic losses of enterprises when the supply chain disrupt caused by internal (e.g., the quality of products, the interruption of funds, and the disruption of logistic) or external (e.g., the change of weather, the pandemic of COVID-19, and the change of market) risks \citep{Sodhi2012a, Heckmann2015}.\par
According to the type of risks, the literature of supply chain insurance contracts can be reducible to two categories.
(1) One is to hedge internal risks by combining insurance contracts with supply chain contracts.
As insurance contracts could coordinate the supply chain \citep{Lin2010}, researchers compared it with the revenue sharing contract according to different agents’ risk aversion based on the newsvendor model.
Besides, \cite{Wang2021} also discussed which contract is better for the supply chain partners between the advanced payment contract, penalty contract, and time insurance contract in the express delivery supply chain.\par
(2) Another is to study the trade-off between high commercial insurance and the substantial economic losses caused by external risks.
The typical market risk of demand uncertainty is a thorny question that the newsvendor model faces thus \cite{LodreeJr2008} design an insurance policy framework to quantify the risks and benefits, which give decision-makers a practical approach to prepare for supply chain disruptions.
Moreover, \cite{Yu2021} considered the interrupt probability of the supply chain and illustrate the value of business interruption insurance which increases the profit of each participant.
\cite{Brusset2018} constructed a weather index through case studies that transfer entrepreneurial risk to other risk-takers through insurance or options contracts.
Similar to these researches, our paper also adopts the insurance contract to hedge the interrupt risk while the focal point is in the space launch supply chain, which is remarkable for technical complexity, high quality \& reliability requirements, and colossal failure losses.
%However, we also combine the blockchain technology with supply chain management which is timely and important.
Government interventions in supply chain management include legislation \citep{Gouda2016, Zhang2018}, penalties \citep{Xiao2018,Luo2020}, subsidies \citep{Guo2019,Xiao2020,Jung2020} and taxes \citep{Xu2018a,Chen2020}.
The stream of research closest to our work is exploring the adoption of government subsidies to promote industry growth or to support firms through difficult times.
In order to improve the social welfare and the manufacturers' profits, different types of subsidy programs has been launched by governments, such as subsidies to consumers, manufacturers, or both \cite{Yu2018}. The authors of this article reveal the influencing factors that determine the optimal structure of government subsidy programs. They find that governments can develop subsidy programs involving multiple competing manufacturers to improve consumer welfare.
However, the government subsidy system is not always effective. \cite{Hsu2019} find that the quality subsidy offered to the farmers quality subsidies provided to farmers may reduce not only the quality of dairy products, but also the profitability of companies.
\cite{Berenguer2017} analyze the effectiveness of subsidies on a for-profit or a not-for profit firm in inducing consumption. Their study shows that the incentive to a not-for-profit counterpart is more stronger than to a for-profit firm to encourage consumption.
Besides, \cite{Bai2021} investigate the design of trade-in subsidy programs by capturing the essence of the interaction between the government, the manufacturer, and consumers. They find that compared with a fixed-amount subsidy, a shared subsidy program in which government subsidies are proportional to manufacturer rebates is more effective in stimulating consumers to trade-in.
In the same vein as the above literature, we also explore the effectiveness of government subsidies in supply chain operations.
However, the difference is that we focus on the commercial space supply chain to explore how subsidy systems can be implemented to leverage its value.
\subsection{Contributions of this paper}
Similar to these researches, our paper also adopts the insurance contract to hedge the interrupt risk while the focal point is in the space launch supply chain, which is remarkable for technical complexity, high quality \& reliability requirements, and colossal failure losses.
%However, we also combine the blockchain technology with supply chain management which is timely and important.
Supply chain insurance with government subsidies and blockchain technology adoption are essential topics in space launch operation management.
Based on the real-world observation, we introduce a three-stage Stackelberg game model to explore the value of government insurance subsidies.
Besides, motivated by the practice of blockchain application such as IBM and Cloud Constellation Corporation are working together to build a blockchain-based platform in the space launch supply chain, this paper theoretically investigates the blockchain-embedded insurance model operations.
The insights not only contribute to the literature in operation management but also advance the industrial knowledge regarding blockchain launch platforms.\par
\subsection{Space supply chain management}
At present, supply chain management in space era is initiated by research institutes, universities and researchers.
Such as China Aerospace Industry Corporation, European Space Agency and Indian Space Research Organisation conducted a series of research on space supply chain management \citep{Kucukcay}.
Moreover one of the famous works is the Interplanetary Supply Chain Management and Logistics Architectures project from \cite{MIT}, which develops an integrated supply chain management framework for space logistics.\par
According to the types of existing studies in this topic, they can be reducible to two categories:\par
(1) One kind of research focuses on optimizing the operating system to improve the efficiency from mathematical models and simulation.
\cite{Galluzzi2006} regarded supply chain management as a critical piece of framework in the aerospace industry, and they elaborated the pattern operation in this area.
\cite{Taylor2006} also designed and evaluated the operating system in the space supply chain, but they primarily engaged in optimizing delivery operation, which sustains the exploration initiative.
Moreover, \cite{Gralla2006} gave a comprehensive model and simulation of the supply chain management implemented in the aerospace industry, which is low-volume and schedule-driven compared to the high-volume and market demand-driven SCM in the commercial sector.\par
(2) Another type of study starred in analyzing the business problem in supply chain management. The research on this topic is relatively few.
\cite{Wooten2018} examined the space industry's operation management, which involves manufacturing operations, supply chain management, and sustainable operations. Besides, they also outlined the challenges and essential questions related to stakeholders.
\cite{Raghunath2021} discussed the challenges that commercial space operation faces from a business perspective.
Furthermore, \cite{Guo2021} comprehensively analyzed the global aerospace industry's current situation and future development from the upstream supply chain, midstream production chain, and downstream application chain.
In addition, \cite{Donelli2021} considered the profitability and efficiency during the aircraft manufacturing and supply chain. The paper proposed a model-based approach to optimal the multiple-choice.
Furthermore, \cite{Dewicki} also based on operational management analyze the business model in commercial space. \par
As review literature, most papers target SCM in space give the mathematical model from optimizing logistics, even the system flow. While our paper builds models from the business angle, we concentrate on the game theory between participants during the launch activity.
\subsection{Blockchain technology support supply chain management}
% congbudong jiaodu d qukuail yanjiu;
As a “trust ledger”, blockchain has overwhelming advantage of data storage such as openness, transparency, tampering, and traceability, which make it possible to manipulate higher quality data \citep{Choi2019}, improving the supply chain efficiency and so on \citep{Chod2020}.
According to its characters, \cite{Queiroz2019,Wang2019,Babich2020, Li2022} gave the review of this topic.\par
Besides, more and more scholars have begun to study the application of blockchain in the supply chain.
(1) Inside the supply chain, (i) in upriver, blockchain technology facilitates the flow of raw materials from the suppliers \citep{ Naydenova2017, Nash2016};
(ii) in the midstream, it promotes the exchange of manufacture information and design smart contracts between participants in the supply chain upstream and downstream and achieve coordination eventually \citep{Moise2018, Hilary2022, Chod2020,Korpela2017,Wang2021a}.
(2) Outside the supply chain,
(i) face the third party, it provides an innovative way for the capital constraint companies to finance \citep{Choi2020,Choi2021};
(ii) face the market, it helps products to fight counterfeits, earn trust of customers and win company reputation in the market \citep{Pun2021, Shen2021,Fan2020}.\par
Regarding our topic, this article mainly refers to articles on the application of blockchain in the space supply chain.
\cite{Adhikari2020} gave a clearly analysis on the implementation of blockchain in the area of space cybersecurity framework against global positioning system spoofing.
\cite{Zheng2021} studied a three-tier space supply chain under the decision-making problem and investigated how blockchain technology optimizes decisions based on information sharing.
Moreover, \cite{HylandWood2020} examined three potential blockchain properties applied in space: real-time communication during the interplanetary space operating and operations realm of the solar system.
However, different from them, this article's focal point is on launching a service supply chain supported by fintech ( blockchain-embedded insurance) to facilitate launching risks and contract pricing.
\subsection{Government subsidies}
Government interventions in supply chain management include legislation \citep{Gouda2016, Zhang2018}, penalties \citep{Xiao2018,Luo2020}, subsidies \citep{Guo2019,Xiao2020,Jung2020} and taxes \citep{Xu2018a,Chen2020}.
The stream of research closest to our work is exploring the adoption of government subsidies to promote industry growth or to support firms through difficult times.
In order to improve the social welfare and the manufacturers' profits, different types of subsidy programs has been launched by governments, such as subsidies to consumers, manufacturers, or both \cite{Yu2018}. The authors of this article reveal the influencing factors that determine the optimal structure of government subsidy programs. They find that governments can develop subsidy programs involving multiple competing manufacturers to improve consumer welfare.
However, the government subsidy system is not always effective. \cite{Hsu2019} find that the quality subsidy offered to the farmers quality subsidies provided to farmers may reduce not only the quality of dairy products, but also the profitability of companies.
\cite{Berenguer2017} analyze the effectiveness of subsidies on a for-profit or a not-for profit firm in inducing consumption. Their study shows that the incentive to a not-for-profit counterpart is more stronger than to a for-profit firm to encourage consumption.
Besides, \cite{Bai2021} investigate the design of trade-in subsidy programs by capturing the essence of the interaction between the government, the manufacturer, and consumers. They find that compared with a fixed-amount subsidy, a shared subsidy program in which government subsidies are proportional to manufacturer rebates is more effective in stimulating consumers to trade-in.
In the same vein as the above literature, we also explore the effectiveness of government subsidies in supply chain operations.
However, the difference is that we focus on the commercial space supply chain to explore how subsidy systems can be implemented to leverage its value.
\subsection{Summary}
Supply chain insurance with government subsidies and blockchain technology adoption are essential topics in space launch operation management.
Based on the real-world observation, we introduce a three-stage Stackelberg game model to explore the value of government insurance subsidies.
Besides, motivated by the practice of blockchain application such as IBM and Cloud Constellation Corporation are working together to build a blockchain-based platform in the space launch supply chain, this paper theoretically investigates the blockchain-embedded insurance model operations.
The insights not only contribute to the literature in operation management but also advance the industrial knowledge regarding blockchain launch platforms.\par
The following parts in this paper are organized as:
\refsec{sec:models} establishes the benchmark case and investigates the value of government subsidies, one for launch insurance model (Model I) and the other for government-subsidy insurance model (Model IG).
\refsec{sec:blockchain case} examines the value of blockchain technology in the satellite launch supply chain under two scenarios (with launch insurance or with government-subsidized launch insurance) through Model B and Model GB.
\refsec{sec:extensions} extend the framework to robust our main models and generate new findings.
\refsec{sec:conclusions} concludes this study and gives analytical insights.
\section{Benchmark case} \label{sec:models}
@ -900,7 +832,7 @@ Otherwise, subsidies can only increase the profit of satellite operators, but ca
\section{The case with blockchain technology } \label{sec:blockchain case}
\section{The case with blockchain technology } \label{sec:blockchain}
After exploring Model I and Model IG, we find that government subsidies for launch insurance do not benefit customers that the data demand $D$ and retail price $p$ remain unchanged in these two models.
Luckily, the implementation of innovative technology, blockchain technology (BCT), injects new blood into the commercial space industry in two aspects: