Auctioning Resource Rights

Posted: 8 Oct 2014

See all articles by Kenneth Hendricks

Kenneth Hendricks

University of Texas at Austin - Department of Economics

Robert H. Porter

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

Date Written: November 2014

Abstract

We review the issues involved in designing a mechanism for allocating resource rights. We focus on the case of exploration and development rights for oil and gas leases in US federal lands to highlight the trade-offs at play. The main issues concern the design of the lease contract, the design of the auction, and the supply of leases. A distinguishing feature of oil and gas leases is that the mechanism must solve not only the adverse selection problem of selecting the bidder with the highest valuation but also the moral hazard problem of ensuring that right holders make efficient investment decisions.

Suggested Citation

Hendricks, Kenneth and Porter, Robert H., Auctioning Resource Rights (November 2014). Annual Review of Resource Economics, Vol. 6, Issue 1, pp. 175-190, 2014, Available at SSRN: https://ssrn.com/abstract=2507221 or http://dx.doi.org/10.1146/annurev-resource-091912-151752

Kenneth Hendricks (Contact Author)

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

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

Robert H. Porter

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)

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Cambridge, MA 02138
United States

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