How Best to Auction Oil Rights
I study the design of oil rights auctions. 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 additive values, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids, such as the clock-proxy auction, likely is needed to promote the efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take by reducing oil company risk.
|Date of creation:||2005|
|Date of revision:||2005|
|Publication status:||Published in Macartan Humphreys, Jeffrey Sachs, Joseph Stiglitz, eds., Escaping the Resource Curse, forthcoming, 2006.|
|Contact details of provider:|| Postal: |
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu
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