Government reputation and the value of mining rights

Government's infringing on mining rights enhances the uncertainty the bidders will face, reduces the value of the auctioned mining rights, and cuts down the expected revenue of governments. In order to change this situation, government's commitments of protecting mining rights must be credible. Only if government's powers of infringing property rights have been limited strictly by political and legal systems or governments have set up reputations of protecting mining rights are the government's commitments credible. The more governments adopt the way of auction when they transfer mining rights, the more they are impelled to set up reputations.