Underbidding for oil and gas tracts

Martin, Julien, Pesendorfer, Martin ORCID: 0000-0002-0547-8711 and Shannon, Jack (2025) Underbidding for oil and gas tracts. American Economic Review. ISSN 0002-8282 (In Press)

Text (Underbidding March 2025 Final) - Accepted Version Pending embargo until 1 January 2100. Available under License Creative Commons Attribution. Download (508kB)

Abstract

Common values auction models, where bidder decisions depend on noisy signals of common values, provide predictions about Bayesian Nash equilibrium (BNE) outcomes. In settings where these common values can be estimated, these predictions can be tested. We propose a series of tests, robust to assumptions about the signal structure, to determine whether the observed data could have been generated by a Bayesian Nash equilibrium. In the setting of oil and gas lease auctions in New Mexico, we nd evidence that participation decisions are correlated and that participants system- atically underbid in light of ex post outcomes.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HB Economic Theory
JEL classification:	D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General L - Industrial Organization > L4 - Antitrust Issues and Policies > L40 - General
Date Deposited:	03 Jun 2025 08:39
Last Modified:	03 Jun 2025 08:39
URI:	http://eprints.lse.ac.uk/id/eprint/128285

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