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

44 Pages Posted: 10 May 2001 Last revised: 1 Sep 2022

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)

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Date Written: May 2001

Abstract

This paper studies federal auctions for wildcat leases on the Outer Continental Shelf from 1954 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 may bid less aggressively when they expect more competition.

Suggested Citation

Hendricks, Kenneth and Pinkse, Joris and Porter, Robert H., Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions (May 2001). NBER Working Paper No. w8294, Available at SSRN: https://ssrn.com/abstract=269544

Kenneth Hendricks (Contact Author)

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

Austin, TX 78712
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512-475-8532 (Phone)
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Joris Pinkse

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

608 Kern Graduate Building
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Robert H. Porter

Northwestern University - Department of Economics ( email )

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United States
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National Bureau of Economic Research (NBER)

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