Joint Bidding in Federal Offshore Oil and Gas Lease Auctions

Ken Hendricks, Robert Porter and Guofu Tan
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Ken Hendricks: University of British Columbia

No 1763, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: This paper provides an explanation for why cartels are not observed frequently in mineral-rights auctions even though it was not illegal for them to form. We use the techniques of mechanism design to characterize the efficient, incentive compatible cartel and show that it can be implemented by a first-price knockout tournament with information sharing. We show, however, that bidders with the highest signals typically prefer to bid alone rather than join the cartel. We examine bid data from federal offshore oil and gas auctions for evidence that cartels used bid coordination schemes. We also examine the determinants of joint bidding.

Date: 2000-08-01
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Citations: View citations in EconPapers (4)

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