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How Best to Auction Natural Resources

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Abstract

I study the design of auctions of natural resources, such as oil or mineral rights. A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The structure of bidder preferences and the degree of competition are key factors in determining the best design. With weak competition and simple value structures, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids likely is needed to promote efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take by reducing oil or mining company risk.

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File URL: http://www.cramton.umd.edu/papers2005-2009/cramton-auctioning-natural-resources.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 09anr.

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Length: 23 pages
Date of creation: 2009
Date of revision: 2009
Publication status: Published in Philip Daniel, Brenton Goldsworthy, Michael Keen, and Charles McPherson (eds.), Handbook of Oil, Gas And Mineral Taxation, Chapter 10, forthcoming, Washington, DC: IMF
Handle: RePEc:pcc:pccumd:09anr

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
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Web page: http://www.cramton.umd.edu

Related research

Keywords: Auctions; natural resource auctions; oil auctions;

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  1. How to best auction natural resources
    by Economic Logician in Economic Logic on 2009-05-15 00:03:00
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Cited by:
  1. Abhishek, Vineet & Hajek, Bruce & Williams, Steven R., 2013. "Auctions with a profit sharing contract," Games and Economic Behavior, Elsevier, vol. 77(1), pages 247-270.

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