Market Power in Uranium Enrichment

Abstract

Four firms dominate the international uranium enrichment market. Simultaneously, the nations that host enrichment facilities strongly discourage other nations from developing enrichment capacity, given its potential use in nuclear weapons production. Therefore, these four firms benefit from the exercise of national power to prevent entry into this market. This paper shows that these firms also benefit from increasing returns to scale. In similar national situations, this industry would be regulated or nationalized. This is because free markets do not necessarily lead to a socially optimal long-run equilibrium where the industry is necessarily concentrated, such that there is no proliferating entry, but is sufficiently diverse, so that no one national group can dictate prices, contract terms, or non-proliferation policy. Therefore, some form of international regulation might be necessary to discourage enrichment technology proliferation and assure enrichment supply at reasonable prices.