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Joint Bidding, Entry, and the Price of OCS Leases

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  • C.E. Moody Jr.
  • W.J. Kruvant

Abstract

We use a two-equation system to estimate the effects of joint bidding on the number of bids and the maximum bid the government received in auctions for Offshore Continental Shelf tracts held between 1979 and 1983. The estimates are corrected for selection bias and simultaneity. We find that joint bidding encourages entry in the sense that the number of bids is positively associated with the existence of joint bidding. We also find support for the hypothesis that joint bidding increases the high bid with the number of bids held constant. We use these results to estimate the cost of a ban on joint bidding for OCS leases.

Suggested Citation

  • C.E. Moody Jr. & W.J. Kruvant, 1988. "Joint Bidding, Entry, and the Price of OCS Leases," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 276-284, Summer.
    • Handle: RePEc:rje:randje:v:19:y:1988:i:summer:p:276-284
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    Citations

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    Cited by:

    1. Jianfu Shen & Frederik Pretorius & Xin Li, 2019. "Does Joint Bidding Reduce Competition? Evidence from Hong Kong Land Auctions," The Journal of Real Estate Finance and Economics, Springer, vol. 58(1), pages 111-132, January.
    2. Iledare, Omowumi O. & Pulsipher, Allan G., 2007. "Joint bidding restriction policy for selective E&P firms in the US Gulf of Mexico OCS: How persuasive is its effectiveness?," Energy Policy, Elsevier, vol. 35(6), pages 3126-3133, June.
    3. Bouckaert, Jan & Van Moer, Geert, 2021. "Joint bidding and horizontal subcontracting," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    4. Iledare, Omowumi O. & Pulsipher, Allan G. & Olatubi, Williams O. & Mesyanzhinov, Dmitry V., 2004. "An empirical analysis of the determinants of high bonus bids for petroleum leases in the U.S. Outer Continental Shelf (OCS)," Energy Economics, Elsevier, vol. 26(2), pages 239-259, March.
    5. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    6. Karen Maguire, 2013. "Drill Baby Drill? Political and Market Influences on Federal Onshore Oil and Gas Leasing in the Western United States," Economics Working Paper Series 1401, Oklahoma State University, Department of Economics and Legal Studies in Business, revised Apr 2013.
    7. Nakanishi, Yoshinobu, 2022. "Determinants of the number of bidders and win-reserve ratio in open competitive tendering: Relationship-specific investments and incomplete contracts," Japan and the World Economy, Elsevier, vol. 63(C).
    8. Estache, Antonio & Iimi, Atsushi, 2009. "Auctions with endogenous participation and quality thresholds : evidence from ODA infrastructure procurement," Policy Research Working Paper Series 4853, The World Bank.
    9. BOUCKAERT, Jan & VAN MOER, Geert, 2022. "When rivals team up in procurement: does it distort competition?," Working Papers 2022001, University of Antwerp, Faculty of Business and Economics.
    10. Antonio Estache & Atsushi Iimi, 2009. "Joint Bidding, Governance And Public Procurement Costs:A Case Of Road Projects," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 393-429, September.
    11. Jean-Jacques Laffont, 1998. "Théorie des jeux et économie empirique : le cas des données issues d'enchères," Économie et Prévision, Programme National Persée, vol. 132(1), pages 121-137.
    12. Marquez, Robert & Singh, Rajdeep, 2013. "The economics of club bidding and value creation," Journal of Financial Economics, Elsevier, vol. 108(2), pages 493-505.
    13. Iimi, Atsushi, 2004. "(Anti-)Competitive effect of joint bidding: evidence from ODA procurement auctions," Journal of the Japanese and International Economies, Elsevier, vol. 18(3), pages 416-439, September.
    14. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
    15. Boone, Audra L. & Mulherin, J. Harold, 2011. "Do private equity consortiums facilitate collusion in takeover bidding?," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1475-1495.

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