Investors facing opportunistic governments: Is it really good to "know themarket" before investing?

When a government cannot commit to future policies, investors face the risk of opportunistic behavior in addition to uncertain market conditions. We s how that although reducing market uncertainty is sometimes essential for in vestment, it may aggravate problems of opportunism. The better informed the investor is before investing, the more information the government can infe r from observing that investment takes place, in turn enabling more efficie nt rent extraction. This signaling effect can dominate; if the investor rec eives "too accurate" information before investing, the only equilibrium is the one in which no investment occurs. JEL classification: D82; L51.