Optimal resource extraction contracts under threat of expropriation
By: Eduardo Engel, Ronald Fischer.
Contributors: Fischer, Ronald D.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13742; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13742.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty.  In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value.  In this environment, the planner's optimal contract avoids states with high probability of expropriation.  The contract can be implemented via a competitive auction with reasonable informational requirements.  The bidding variable is a cap on the present value of discounted revenues, and the firm with the lowest bid wins the contract.  The basic framework is extended to incorporate government subsidies, unenforceable investment effort and political moral hazard, and the general thrust of the results described above is preserved"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/11/2008.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.