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
Date Written: August 1999
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: Suggested Citation