Auctioning resource rights

Kenneth Hendricks*, Robert H. Porter

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

We review the issues involved in designing a mechanism for allocating resource rights. We focus on the case of exploration and development rights for oil and gas leases in US federal lands to highlight the trade-offs at play. The main issues concern the design of the lease contract, the design of the auction, and the supply of leases. A distinguishing feature of oil and gas leases is that the mechanism must solve not only the adverse selection problem of selecting the bidder with the highest valuation but also the moral hazard problem of ensuring that right holders make efficient investment decisions.

Original languageEnglish (US)
Pages (from-to)175-190
Number of pages16
JournalAnnual Review of Resource Economics
Volume6
Issue number1
DOIs
StatePublished - Oct 5 2014

Keywords

  • auctions
  • leases
  • oil and gas
  • royalty

ASJC Scopus subject areas

  • Economics and Econometrics

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