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An Analysis of Alternative Bidding Systems for Leasing Offshore Oil

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  • Douglas K. Reece

Abstract

This study utilizes a formal model of competitive bidding to analyze some alternative procedures for selling offshore oil leases. We assume that the population of leases to be sold contains tracts having both positive and negative true values and that firms are able to obtain informative, but highly uncertain, estimates of the true value of each tract. We derive firms' Nash equilibrium bidding strategies for bonus, profit-share, and a form of royalty bidding and then analyze the expected division of economic rent between buyer and seller for the three bidding systems.

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  • Douglas K. Reece, 1979. "An Analysis of Alternative Bidding Systems for Leasing Offshore Oil," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 659-669, Autumn.
    • Handle: RePEc:rje:bellje:v:10:y:1979:i:autumn:p:659-669
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    Cited by:

    1. John G. Riley, 1986. "Ex Post Information in Auctions," UCLA Economics Working Papers 367, UCLA Department of Economics.
    2. Brasil, Eric Universo Rodrigues & Postali, Fernando Antonio Slaibe, 2014. "Informational rents in oil and gas concession auctions in Brazil," Energy Economics, Elsevier, vol. 46(C), pages 93-101.
    3. Araujo, Aloisio & Costellini, Clara & Damé, Otávio & Monteiro, Paulo K., 2016. "Shortcomings of the Brazilian Pre-Salt Auction Design," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 70(4), December.
    4. Griffin, Robert, 2013. "Auction designs for allocating wind energy leases on the U.S. outer continentalshelf," Energy Policy, Elsevier, vol. 56(C), pages 603-611.
    5. Jarl G. Kallberg & Crocker H. Liu & Adam Nowak, 2021. "An Empirical Analysis of Double Round Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 531-555, June.
    6. Rucker, Randal R. & Leffler, Keith B., 1986. "To Harvest Or Not To Harvest? An Analysis Of Cutting Behavior On Federal Timber Sales Contracts," Department of Economics and Business - Archive 259420, North Carolina State University, Department of Economics.
    7. Kolstad, Charles D., 2000. "Energy and Depletable Resources: Economics and Policy, 1973-1998," Journal of Environmental Economics and Management, Elsevier, vol. 39(3), pages 282-305, May.

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