Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions
This paper studies federal auctions for wildcat leases on the Outer Continental Shelf from 1954 to 1970. These are leases where bidders privately acquire (at some cost) noisy, but equally informative, signals about the amount of oil and gas that may be present. We develop a test of equilibrium bidding in a common values model that is implemented using data on bids and ex post values. We compute bid markups and rents under the alternative hypotheses of private and common values and find that the data are more consistent with the latter hypothesis. Finally, we use data on tract location and ex post values to test the comparative static prediction in common value auctions that bidders may bid less aggressively when they expect more competition.
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90-47, C.V. Starr Center for Applied Economics, New York University.
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- Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
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- R. Preston McAfee & Daniel Vincent, 1992.
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977, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Klemperer, Paul, 1998.
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- Paul Klemperer, 1997. "Auctions with Almost Common Values: The Wallet Game and its Applications," Economics Series Working Papers 1998-W03, University of Oxford, Department of Economics.
- Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997.
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- Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December.
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