Empirical implications of equilibrium bidding in first-price, symmetric, common value auctions

Kenneth Hendricks*, Joris Pinkse, Robert H. Porter

*Corresponding author for this work

Research output: Contribution to journalArticle

89 Scopus citations

Abstract

This paper studies federal auctions for wildcat leases on the Outer Continental Shelf from 1954 to 1970. These are leases where bidders privately acquire (at some cost) noisy, but equally informative, signals about the amount of oil and gas that may be present. We develop tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values. We also use data on tract location and ex post values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition. We find that bidders are aware of the "winner's curse" and their bidding is largely consistent with equilibrium.

Original languageEnglish (US)
Pages (from-to)115-145
Number of pages31
JournalReview of Economic Studies
Volume70
Issue number1
DOIs
StatePublished - Jan 1 2003

ASJC Scopus subject areas

  • Economics and Econometrics

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