Paradoxical Behavior of Production Sharing Participant
We consider a mining or other extractive project, which is fulfilled on the basis of a production-sharing agreement. These agreements provide for production sharing on the basis of current IRR or current R-factor. The implications of using such production sharing mechanisms are studied with the help of simple economic-mathematical models. It appears that in some cases these mechanisms stimulate paradoxical behavior of the investor. For example, those variants of a project which require higher investments but return same yields happen to be more advantageous to the investor; and similar are those variants which provide smaller yields with the same investments.
Volume (Year): (2009)
Issue (Month): 1-2 ()
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