@article{84badcae7c3f4385bd9fb120d7850246,
title = "Bidding and Drilling under Uncertainty: An Empirical Analysis of Contingent Payment Auctions",
abstract = "Auctions are often used to sell assets whose future cash flows require the winner to make postauction investments. When winners{\textquoteright} payments are contingent on these cash flows, auction design can influence both bidding and incentives to exert effort after the auction. We propose a model of contingent payment auctions that links auction design to postauction economic activity. In the context of oil leases in the Permian Basin, we show that moral hazard affects the relative revenue ranking of different auction designs. Among a large class of alternatives, the observed design cannot be changed to increase both revenues and drilling rates.",
author = "Vivek Bhattacharya and Andrey Ordin and Roberts, {James W.}",
note = "Funding Information: We appreciate the useful feedback from Allan Collard-Wexler, Thom Covert, Matt Gentry, Ryan Kellogg, Rob Porter, Mar Reguant, Rich Sweeney, and numerous seminar participants. Xiaomin Guo, Hayagreev Ramesh, Mark Thomas, Drew Volmer, Shanchao Wang, and Kelly Yang provided excellent research assistance. Roberts acknowledges support from the National Science Foundation (SES-1559481). Data are provided as supplementary material online. This paper was edited by Ali Horta{\c c}su. Publisher Copyright: {\textcopyright} 2022 The University of Chicago. All rights reserved. Published by The University of Chicago Press.",
year = "2022",
month = may,
doi = "10.1086/718916",
language = "English (US)",
volume = "130",
pages = "1319--1363",
journal = "Journal of Political Economy",
issn = "0022-3808",
publisher = "University of Chicago",
number = "5",
}