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

Kenneth Hendricks; Joris Pinkse; Robert H. Porter

doi:10.1111/1467-937X.00239

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

Kenneth Hendricks^*, Joris Pinkse, Robert H. Porter

^*Corresponding author for this work

Economics

Research output: Contribution to journal › Article › peer-review

120 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 language	English (US)
Pages (from-to)	115-145
Number of pages	31
Journal	Review of Economic Studies
Volume	70
Issue number	1
DOIs	https://doi.org/10.1111/1467-937X.00239
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

Access to Document

10.1111/1467-937X.00239

Cite this

@article{903d998bb02940e1b2b0702bd265ad0e,

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

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.",

author = "Kenneth Hendricks and Joris Pinkse and Porter, {Robert H.}",

note = "Funding Information: 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.",

year = "2003",

month = jan,

doi = "10.1111/1467-937X.00239",

language = "English (US)",

volume = "70",

pages = "115--145",

journal = "Review of Economic Studies",

issn = "0034-6527",

publisher = "Oxford University Press",

number = "1",

}

TY - JOUR

T1 - Empirical implications of equilibrium bidding in first-price, symmetric, common value auctions

AU - Hendricks, Kenneth

AU - Pinkse, Joris

AU - Porter, Robert H.

N1 - Funding Information: 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.

PY - 2003/1

Y1 - 2003/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=0037237288&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0037237288&partnerID=8YFLogxK

U2 - 10.1111/1467-937X.00239

DO - 10.1111/1467-937X.00239

M3 - Article

AN - SCOPUS:0037237288

SN - 0034-6527

VL - 70

SP - 115

EP - 145

JO - Review of Economic Studies

JF - Review of Economic Studies

IS - 1

ER -

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

Abstract

Funding

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this