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Joint Bidding in Federal Offshore Oil and Gas Lease Auctions

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Listed:
  • Ken Hendricks

    (University of British Columbia)

  • Rob Porter

    (University of British Columbia)

  • Guofu Tan

    (University of British Columbia)

Abstract

This paper provides an explanation for why cartels are not observed frequently in mineral-rights auctions even though it was not illegal for them to form. We use the techniques of mechanism design to characterize the efficient, incentive compatible cartel and show that it can be implemented by a first-price knockout tournament with information sharing. We show, however, that bidders with the highest signals typically prefer to bid alone rather than join the cartel. We examine bid data from federal offshore oil and gas auctions for evidence that cartels used bid coordination schemes. We also examine the determinants of joint bidding.

Suggested Citation

  • Ken Hendricks & Rob Porter & Guofu Tan, 2000. "Joint Bidding in Federal Offshore Oil and Gas Lease Auctions," Econometric Society World Congress 2000 Contributed Papers 1763, Econometric Society.
    • Handle: RePEc:ecm:wc2000:1763
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    References listed on IDEAS

    as
    1. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    2. Porter, Robert H, 1995. "The Role of Information in U.S. Offshore Oil and Gas Lease Auctions," Econometrica, Econometric Society, vol. 63(1), pages 1-27, January.
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    Cited by:

    1. Volker Nocke & Lucy White, 2007. "Do Vertical Mergers Facilitate Upstream Collusion?," American Economic Review, American Economic Association, vol. 97(4), pages 1321-1339, September.
    2. Atsushi Iimi, 2007. "Aid and competition in procurement auctions: a case of highway projects," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(7), pages 997-1015.
    3. Quang Vuong & Sandra Campo & Isabelle Perrigne, 2003. "Asymmetry in first-price auctions with affiliated private values," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 179-207.
    4. 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.

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