Underbidding for Oil and Gas Tracts

Julien Martin, Martin Pesendorfer and Jack Shannon

American Economic Review, 2025, vol. 115, issue 8, 2755-80

Abstract: Common values auction models, where bidder decisions depend on noisy signals of common values, provide predictions about Bayesian Nash equilibrium (BNE) outcomes. In settings where these common values can be estimated, these predictions can be tested. We propose a series of tests, robust to assumptions about the signal structure, to determine whether the observed data could have been generated by a Bayesian Nash equilibrium. In the setting of oil and gas lease auctions in New Mexico, we find evidence that participation decisions are correlated and that participants systematically underbid in light of ex post outcomes.

JEL-codes: D44 D82 L12 L71 Q35 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20231356 (application/pdf)
https://doi.org/10.3886/E216041V1 (text/html)
https://www.aeaweb.org/articles/materials/23637 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:115:y:2025:i:8:p:2755-80

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20231356

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().