what is the correct amount? If ExxonMobil invests in Venezuela\'s oil fields, it
ID: 1107229 • Letter: W
Question
what is the correct amount?
If ExxonMobil invests in Venezuela's oil fields, it runs the risk that Venezuela will later partially nationalize the assets. The payoffs are represented in the game tree illustrated in the figure to the right. Nationalize (24,96) Suppose that the parties could initially agree to a binding contract that Venezuela would pay ExxonMobil x dollars if it nationalizes the oil fields. How large does x have to be for ExxonMobil to invest in Venezuela? Governme Venezuela -(60,60) The value of x would have to be at least equal to Sfor ExoxonMobil to invest in Venezuela. (Enter your response as a whole number.) Don't nationalize xonMobi Elsewhere (300)Explanation / Answer
If ExxonMobi dont invest then the payoff is 30 and when invest and then Govt of Venezuela nationalised then payoff is 24. Thus 6 extra payoff is more required to invest which Govt should be ready to pay because govt gets a payoff of 96.
Thus X=6
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