Data/hora: 01/06/2024 04:43:15

Provedor de dados: | 31
País: | United States
Título: | Profit Sharing under the Threat of Nationalization
Autores: | Di Corato,   Luca.
Data: | 2010-02-22
Ano: | 2010
Palavras-chave: | Real Options; Nash Bargaining; Expropriation; Natural Resources; Foreign Direct Investment; International Relations/Trade; Resource /Energy Economics and Policy; C7; D8; K3; F2; O1.
Resumo: | A multinational corporation engages in foreign direct investment for the extraction of a natural resource in a developing country. The corporation bears the initial investment and earns as a return a share of the profits. The host country provides access and guarantees conditions of operation. Since the investment is totally sunk, the corporation must account in its plan not only for uncertainty in market conditions but also for the threat of nationalization. In a real options framework, where the government holds an American call option on nationalization, we show under which conditions a Nash bargaining leads to a profit distribution maximizing the joint venture surplus. We find that the threat of nationalization does not affect the investment threshold but only the Nash bargaining solution set. Finally, we show that the optimal sharing rule results from the way the two parties may differently trade of rents with option values.
Tipo: | Working or Discussion Paper
Idioma: | Inglês
Identificador: | http://purl.umn.edu/58292

Relação:

Swedish University of Agricultural Sciences&gt;Department of Economics&gt;Working Papers

Working Paper

2010: 1

Formato: | 23