NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions

Kenneth Hendricks, Joris Pinkse, Robert H. Porter

NBER Working Paper No. 8294
Issued in May 2001
NBER Program(s):   IO

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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Document Object Identifier (DOI): 10.3386/w8294

Published: Hendricks, Kenneth, Joris Pinkse and Robert H. Porter. "Empirical Implications Of Equilibrium Bidding In First-price, Symmetric, Common Value Auctions," Review of Economic Studies, 2003, v70(1,Jan), 115-145. citation courtesy of

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