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Asymmetric information in oil and gas lease auctions with a national company

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  • Matoso, Rafael
  • Rezende, Marcelo

Abstract

This paper analyzes bidding behavior in oil and gas tract auctions in Brazil, where the main winner has been Petrobras, a national company. We test predictions from the theory of common-value, first-price, sealed-bid auctions with asymmetric information. The tests indicate that Petrobras was better informed about tract values than other bidders. We show that Petrobras bid higher than its competitors for more profitable tracts, and that it bid more frequently than its competitors for tracts being re-offered after receiving no bids in previous auctions. We also find evidence that Petrobras could bid competitively in a limited number of auctions only, and we discuss how our results can help to improve oil and gas tract auction rules.

Suggested Citation

  • Matoso, Rafael & Rezende, Marcelo, 2014. "Asymmetric information in oil and gas lease auctions with a national company," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 72-82.
    • Handle: RePEc:eee:indorg:v:33:y:2014:i:c:p:72-82
    DOI: 10.1016/j.ijindorg.2014.02.006
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    Cited by:

    1. Miguel Vazquez & Michelle Hallack, 2017. "Efficiency versus transaction costs in multidimensional auctions: the case of Brazilian oil and gas lease auctions," IEFE Working Papers 94, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    2. Holzer, Jorge & McConnell, Kenneth, 2023. "Extraction rights allocation with liquidity constraints," Resource and Energy Economics, Elsevier, vol. 71(C).
    3. Holzer, Jorge & DePiper, Geret & Lipton, Douglas, 2017. "Buybacks with costly participation," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 130-145.

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    More about this item

    Keywords

    Oil and gas lease auctions; Asymmetric information; National oil company;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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