The Effect of Repeated Interaction on Contract Duration and Performance in the Offshore Drilling Industry

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Rahi, Sorena | 2017

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 49667 (44)
University: Sharif University of Technology
Department: Economic Sciences
Advisor(s): Rahmati, Mohammad Hossein
Abstract:
This research is aimed at analyzing the effects of forming relationships between oil and gas companies and drilling rigs owned by drilling companies. For this purpose, panel data on 13240 contracts signed between 2000-2010 worldwide are used through employing a model with fixed effects and an instrumental variable for day-rate. Results show that repeated interaction between oil and gas companies and drilling rigs, does on one hand increase the number of contracted projects in future contracts, and on the other hand, improves their drilling performance. Moreover, it is seen that such effects are only captured by the first few interactions, and that they subside and vanish after the firms have contracted a couple of times
Keywords:
Adverse Selection ; Moral Hazard ; Contracts Theory ; Repeated Interaction ; Information Symmetry

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