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 language | English (US) |
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Pages (from-to) | 115-145 |
Number of pages | 31 |
Journal | Review of Economic Studies |
Volume | 70 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2003 |
Funding
Acknowledgements. We received helpful comments from two referees, Mark Armstrong, Susan Athey, Phil Haile and Preston McAfee, and from the participants in a number of seminars. Hendricks and Pinkse received financial support from SSHRCC, and Porter from the NSF.
ASJC Scopus subject areas
- Economics and Econometrics