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Competitive Bidding for Offshore Petroleum Leases

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Author Info
Douglas K. Reece
Abstract

This paper develops a formal model of competitive bidding to analyze some aspects of the federal offshore oil leasing system. The lease sales of interest are often characterized by small numbers of auction participants and by high levels of uncertainty regarding the true values of the leases offered. The model suggests that these circumstances may lead to the capture of a substantial fraction of economic rent by the purchases of leases. Indeed, our results suggest that the government should be willing to fund a substantial exploration effort to bring better presale information into the public domain. Some effects of the level of uncertainty and the number of competing bidders on industry efficiency are also considered.

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

Volume (Year): 9 (1978)
Issue (Month): 2 (Autumn)
Pages: 369-384
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Handle: RePEc:rje:bellje:v:9:y:1978:i:autumn:p:369-384

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  1. Dirk Alboth & Anat Lerner & Jonathan Shalev, 1997. "Profit Maximizing in Auctions of Public Goods," Game Theory and Information 9707010, EconWPA, revised 01 Apr 1998. [Downloadable!]
    Other versions:
  2. Ronald M. Harstad, 2007. "Does a Seller Really Want Another Bidder?," Working Papers 0711, Department of Economics, University of Missouri. [Downloadable!]
  3. Bernard Lebrun, 2008. "First-Price, Second-Price, and English Auctions with Resale," Working Papers 2008_06, York University, Department of Economics. [Downloadable!]
  4. John G. Riley & William Samuelson, 1979. "Optimal Auctions," UCLA Economics Working Papers 152, UCLA Department of Economics. [Downloadable!]
    Other versions:
  5. Marc S. Robinson, 1982. "Oil Lease Auctions: Reconciling Economic Theory with Practice," UCLA Economics Working Papers 271, UCLA Department of Economics. [Downloadable!]
  6. ALBOTH, Dirk & LERNER, Anat & SHALEV, Jonathan, 1997. "Auctioning public goods to groups of aghents," CORE Discussion Papers 1997077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. Wilson, William W. & Dahl, Bruce L. & Johnson, D. Demcey, 1999. "Transparency And Bidding Competition In International Wheat Trade," Agricultural Economics Reports 23403, North Dakota State University, Department of Agribusiness and Applied Economics. [Downloadable!]
  8. Marc S. Robinson, 1984. "Oil Lease Auctions: Reconciling Economic Theory with Practice," UCLA Economics Working Papers 292, UCLA Department of Economics. [Downloadable!]
  9. Brett R. Gelso & John C. Whitehead, 2008. "Effect of US Policies on Offshore Oil Leasing, 1983-2006: A Random Parameter Logit Regression Analysis," Working Papers 08-03, Department of Economics, Appalachian State University. [Downloadable!]
  10. Wilson, William W. & Diersen, Matthew A., 1999. "Competitive Bidding On Import Tenders: The Case Of Minor Oilseeds," Agricultural Economics Reports 23421, North Dakota State University, Department of Agribusiness and Applied Economics. [Downloadable!]
  11. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  12. Gino Loyola, 2008. "On bidding markets: the role of competition," Economics Working Papers we083318, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  13. Kenneth French & Robert McCormick, 1982. "Sunk Costs and Competitive Bidding," University of California at Los Angeles, Anderson Graduate School of Management 1232, Anderson Graduate School of Management, UCLA. [Downloadable!]
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