Repeated Auctions of Franchises for Nonrenewable Resources

Petter Osmundsen

Journal of Regulatory Economics, 1996, vol. 10, issue 2, 183-89

Abstract: In maximizing the net total government take from exploitation of nonrenewable natural resource endowments, the government faces the problem that extraction companies possess private information about extraction capacities (adverse selection). In a repeated auctions model, I show that it is optimal to deviate from bidding parity, even in the absence of moral hazard. The second period auction is biased to mitigate the externality problem that stems from intertemporal dynamics in extraction costs. Copyright 1996 by Kluwer Academic Publishers

Date: 1996
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