Efficiency versus transaction costs in multidimensional auctions: the case of Brazilian oil and gas lease auctions
Miguel Vazquez and
No 94, IEFE Working Papers from IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy
In Brazil, a scoring auction decides which firm has the right to explore oil and gas in a region. One of its dimensions is the amount of local content that firms are willing to implement. However, local content programs are subject to significant uncertainty and complexity so mal-adaptation costs are relevant. We characterize players’ bidding behavior when they have information on local content implementation and when they do not. We test those predictions using historical bids. Our tests suggest that the mechanism would be more efficient if the definition of local content programs was left out of the auction.
Keywords: Local content; Scoring auctions; Adaptation costs; Oil and gas industry. (search for similar items in EconPapers)
JEL-codes: D23 D82 H57 L14 L22 L74 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-des, nep-ene, nep-gth and nep-lam
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