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An Analysis of Alternative Bidding Systems for Leasing Offshore Oil

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Author Info
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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Publisher Info
Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 10 (1979)
Issue (Month): 2 (Autumn)
Pages: 659-669
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Handle: RePEc:rje:bellje:v:10:y:1979:i:autumn:p:659-669

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  1. Charles D. Kolstad, . "Energy and Depletable Resources: Economics and Policy, 1973-98 (Revised)," University of California at Santa Barbara, Economics Working Paper Series 19-98, Department of Economics, UC Santa Barbara. [Downloadable!]
  2. John G. Riley, 1986. "Ex Post Information in Auctions," UCLA Economics Working Papers 367, UCLA Department of Economics. [Downloadable!]
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This page was last updated on 2009-12-9.

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