TY  - JOUR
AU  - Hendricks,Ken
AU  - Porter,Robert
AU  - Tan,Guofu
TI  - Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9836
PY  - 2003
Y2  - July 2003
UR  - http://www.nber.org/papers/w9836
L1  - http://www.nber.org/papers/w9836.pdf
N1  - Author contact info:
Ken Hendricks
E-Mail: hendrick@eco.utexas.edu

Robert H. Porter
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-3491
Fax: 847/491-7001
E-Mail: r-porter@northwestern.edu

Guofu Tan
University of Southern California
E-Mail: guofutan@usc.edu
AB  - This paper extends the theory of legal cartels to affiliated private value and common value environments, and applies the theory to explain joint bidding patterns in U.S. federal government offshore oil and gas lease auctions. We show that efficient collusion is always possible in private value environments, but may not be in common value environments. In the latter case, fear of the winner's curse can cause bidders not to bid, which leads to inefficient trade. Buyers with high signals may be better off if no one colludes. The bid data is consistent with oil and gas leases being common value assets, and with the prediction that the winner's curse can prevent rings from forming on marginal tracts.
ER  -