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

MIT Department of Economics Working Paper No. 99-19

33 Pages Posted: 21 Feb 2000

See all articles by Kenneth Hendricks

Kenneth Hendricks

University of Texas at Austin - Department of Economics

Joris Pinkse

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Robert H. Porter

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 1999

Abstract

This paper studies federal auctions for wildcat leases on the Outer Continental Shelf from 1959 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 tend to bid less aggressively when they expect more competition.

JEL Classification: C14, D44, D81, L71

Suggested Citation

Hendricks, Kenneth and Pinkse, Joris and Porter, Robert H., Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions (August 1999). MIT Department of Economics Working Paper No. 99-19, Available at SSRN: https://ssrn.com/abstract=195736 or http://dx.doi.org/10.2139/ssrn.195736

Kenneth Hendricks

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States
512-475-8532 (Phone)
512-471-3510 (Fax)

Joris Pinkse

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

608 Kern Graduate Building
University Park, PA 16802-3306
United States
814-863-0508 (Phone)
814-863-4775 (Fax)

Robert H. Porter (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-3491 (Phone)
847-491-7001 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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