Bidding Rings and the Winners Curse: The Case of Federal O¤shore Oil and Gas Lease Auctions

Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions

This paper extends the theory of legal cartels to a.liated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government o.shore oil and gas lease auctions. We show that e.cient collusion is always possible in private value environments, but may not be in common value environments. In the latter case, fear of the winner’s curse ...

Joint Bidding in Federal O®shore Oil and Gas Lease Auctions

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 e±cient, incentive compatible cartel and show that it can be implemented by a ̄rstprice knockout tournament with information sharing. We show, however, that bidders with the highes...

Bidding rings and the winner’s curse

This article extends the theory of legal cartels to affiliated private value and common value environments. We show that efficient collusion is always possible in private value environments, but may not be in common value environments with a binding reserve price. In the latter case, collusion does more than simply transfer rents from the seller to the buyers, it also gives buyers a chance to p...

Recent U.S. O¤shore Oil and Gas Lease Bidding: A Progress Report

Recent U.S. Offshore Oil and Gas Lease Bidding: A Progress Report∗

The U.S. Mineral Management Service (MMS) uses auctions to allocate exploration and drilling rights for oil and gas on federal lands on the Outer Continental Shelf (OCS). The federal offshore leasing program began in 1954, and there have been few alterations in the auction mechanism. However, the environment in which firms bid in these auctions has experienced a number of substantial changes. O...