The Proper Model for Evaluating Buy-back Contracts in Terms of Economics of Information

Authors

1 Associate Professor in Imam Sadeq University

2 PhD Student of Management of International Contracts in Oil and Gas/ Imam Sadeq Univeristy

Abstract

Discussions related to the ‘agent’ and ‘employer’ and their interaction in the form of various contracts are among the common discussions in economics. Thus, the contracts and the agent-employer theories have dealt with it in a variety of contexts. Moral hazards in contracts, especially international oil contracts, are a key subject under the economics of information to present motivational models for maximizing the interests of both parties.
One of the common oil contracts is the buy-back contract. They have been completed and modified in the course of history in the form of 1st,2nd and 3rd generation contracts.
In this article, we have tried, considering the 3rd generation of oil and gas industry specifications, oil contracts and moral hazard models, to choose the proper model for evaluating buy-back contracts.
An investigation of various models of moral hazards shows that moral hazard from both parties could be seen in oil contracts and that both are trying to maximizing their profit. Accordingly, standard model is not proper to evaluate this type of contract and two-sided moral hazard models are more proper in oil contracts.

Keywords

References

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