This dissertation contains three essays that combine applied models, institutional analysis and empirical work in order to understand developments in the Russian and Caspian energy sector following the breakup of the former Soviet Union. In the first essay entitled "Partial Privatization: Evidence from the Russian Oil Sector" (joint with Daniel Berkowitz), we document that Russia's oil sector privatization has been partial because the federal government has maintained ownership rights in several vertically integrated companies and has established a near monopoly position in the allocation of scarce export transport capacity. We develop the proposition that in these circumstances the federal government would tend to give companies in which it has ownership positions preferential access to world export markets. We develop a classification system of company ownership that distinguishes between state-influence and state-independent companies. Using censored-regression techniques, we find compelling evidence that the state-influence companies had privileged access to export transport by 2003, and argue that this suggests that there are substantial efficiency losses in the Russian oil sector. The second essay, "Caspian Oil Boom: Informational Herding among the Oil Companies", analyzes the potential causes of the Caspian oil rush of 1997-1998. It provides an institutional description of foreign investment in the Caspian region in 1997-1998, and looks at different possible explanations for the investment boom. We argue that informational herding among oil companies could have contributed to the high investment activity in the region in the late 1990s, and qualitatively check for the power of the herding against the alternative explanations.In the third essay, "Quality of Information, Information Externalities and Sequential Decisions of Oil Companies," we develop a theoretical model that works out the logic and mechanics of the informational herding explanation for the Caspian oil boom. We show that under certain conditions a second company to enter will invest in the development of a new oil field even if it received a bad informative signal about the profitability of the project. We also show that when companies receive noisy public and private information, the second company may be more likely to invest after receiving a bad signal.
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