Marcus M. Opp

PhD Graduate

Graduate School of Business
University of Chicago

I have accepted an assistant professor position at the University of California, Berkeley (Haas).

mopp(ät)ChicagoGSB.edu

Fields:

Primary: International Finance, Corporate Finance

Secondary: Information Economics, Applied Game Theory

Dissertation:

“Expropriation Risk and Technology”, April 2008

Abstract: My paper characterizes a dynamic relation between a firm and an impatient government that may expropriate the firm without legal punishment. The only sanction mechanism of the firm results from its productivity advantage in managing its assets. In this environment, I derive dynamics of investment and transfers and characterize the unique stationary allocation. The loading of the contract is determined by the initial surplus division. Backloading refers to the case, where investment is increasing over time and transfers from the firm to the government are deferred until the steady state is reached. Frontloading refers to the case where the firm initially makes larger payments than in the steady state. The steady state features non-monotonic comparative statics of the government's payoff with respect to its relative production efficiency. While the reduced incentive problem associated with technological incompetence increases investment efficiency, the lower threat point limits the share of the surplus obtained by the government. Markov-type discount rate shocks of the government generate expropriation on the equilibrium path with low technology-intensive sectors at the top of the pecking order. Firms are able to mitigate the government's incentive to expropriate via non-horizontal integration. The model predictions are consistent with observed contracts between sovereign countries and foreign direct investors. Special emphasis is given to production sharing agreements, the most common contract form in the oil industry. My paper has broader implications for principal-agent models with heterogeneous discounting.

Other papers:

"Tariff Wars in a Ricardian Model with a Continuum of Goods”, July 2007, Status: Revise and Resubmit at Journal of International Economics

"Rybczynski's Theorem in the Heckscher-Ohlin World - Anything Goes", April 2008, joint with Hugo Sonnenschein, Status: Revise and Resubmit at Journal of International Economics

"Biases and Self-Selection: A Theoretical Investigation of the Rothschild-Stiglitz Insurance Model", September 2005

Dissertation Committee:

Additional References :

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