Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions / Ken Hendricks, Robert Porter, Guofu Tan.

Format:

Book

Author/Creator:

Hendricks, Ken.

Contributor:

National Bureau of Economic Research.

Porter, Robert.

Tan, Guofu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9836.

NBER working paper series no. w9836

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Bidding Rings and the Winner's Curse

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

This paper extends the theory of legal cartels to affiliated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government offshore oil and gas lease auctions. We show that efficient 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 can cause bidders not to bid, which leads to inefficient trade. Buyers with high signals may be better off if no one colludes. The bid data is consistent with oil and gas leases being common value assets, and with the prediction that the winner's curse can prevent rings from forming on marginal tracts.

Notes:

Print version record

July 2003.