Equilibrium patterns of competition in OCS lease sales
Name
MIT-EL-80-004WP-06684182.pdf
Size
862.96 KB
Format
Adobe PDF
Checksum (MD5)
c9e50146387c51c8156fd80dca6b058e
Author(s)
Smith, James Lee
Date Issued
March 1980
Publisher
MIT Energy Laboratory
Series/Report no.
MIT-EL
80-004WP
Abstract
An equilibrium model of bidding behavior is developed that accounts
for observed fluctuations in the degree of competition to acquire
offshore petroleum leases. As one might expect, such fluctuations
are related to the heterogeneity of geological prospects that are
offered for sale, with a relatively high degree of competition to
acquire tracts of the highest quality. The equilibrium configuration
of bids is also shown to reflect structural characteristics, such as
capital market constraints, that may restrict competition in the
lease auction. Empirical evidence is presented which tends to confirm
our general theory of bidding equilibria, but which contradicts the
popular notion that capital constraints have restricted competition
in OCS lease sales. Policy implications are discussed in the
concluding section.
Subjects
Oil and gas leases
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