Winter, Jennifer L. (2010): Buying Anonymity: An Investigation of Petroleum and Natural Gas Lease Auctions.
Download (473kB) | Preview
This paper examines how concealing the existence of private information affects winning bids in a large, well-functioning auction environment. Standard auction theory suggests firms should wish to advertise the existence of private information in order to reduce the bids of their competitors (Milgrom and Weber, 1982). There are a limited number of empirical studies on how concealing the existence of private information affects bids. Instead, most articles test for the presence of private information, rather than the effect of revealing or concealing its existence. An institutional feature of the auctions for petroleum and natural gas leases in Alberta is that firms can hire a broker to bid on their behalf, thereby hiding their identity. Anecdotal evidence suggests rms use brokers to conceal information from their competitors. In order to test the predictions of standard theory, I develop a model of bidding behaviour incorporating the choice to use a broker. The model provides an explicit relationship between broker usage, firms' private information, and equilibrium bids. Using a newly constructed dataset, I estimate this relationship. I find results consistent with standard theory: bids are higher when brokers are used to hide the existence of some private information.
|Item Type:||MPRA Paper|
|Original Title:||Buying Anonymity: An Investigation of Petroleum and Natural Gas Lease Auctions|
|Keywords:||exhaustible resources; auctions; strategic behaviour; private information|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q38 - Government Policy
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions
|Depositing User:||Jennifer Winter|
|Date Deposited:||25. Dec 2011 01:04|
|Last Modified:||26. Aug 2015 02:55|
Alberta, "Land Agents Licensing Act," 2010. Chapter/Regulation L-2 RSA 2000.
Alberta Department of Employment and Immigration, "Land Agent Standards of Conduct," http://employment.alberta.ca/CES/247.html November 2007.
Alberta Department of Employment and Immigration, "Licensing of Land Agents," http://employment.alberta.ca/CES/256.html January 2009.
Alberta Department of Energy, "Petroleum and Natural Gas Sales Frequently Asked Questions," http://www.energy.alberta.ca/Tenure/1096.asp April 2011.
Athey, Susan and Philip A. Haile, "Identication of Standard Auction Models," Econometrica, 2002, 70 (6), 2107-2140.
Canadian Association of Petroleum Landmen, "Canadian Association of Petroleum Landmen By-Laws," http://www.landman.ca/pdf/constitution.pdf 2009.
Choo, Eugene and Jean Eid, "Interregional Price Dierencein the New Orleans Auctions Market for Slaves," Journal of Business & Economic Statistics, 2008, 26 (4), 486-509.
Engelbrecht-Wiggans, Richard, Paul R. Milgrom, and Robert J. Weber, "Competitive Bidding and Proprietary Information," Journal of Mathematical Economics, 1983, 11, 161-169.
Gupta, Sudup, "Value of Information in Endogenously Asymmetric Dynamic Auctions: An Empirical Analysis," 2009, Indian School of Business Unpublished Working Paper.
Heckman, James J., "Sample Selection Bias as a Specication Error," Econometrica, 1979, 47 (1), 153-161.
Hendricks, Kenneth and Robert H. Porter, "An empirical study of an auction with asymmetric information," American Economic Review, 1988, 78 (December), 865-883.
Hendricks, Kenneth and Robert H. Porter, "Bidding behavior in OCS drainage auctions: Theory and evidence," European Economic Review, 1993, 37, 320-328.
Hendricks, Kenneth, Robert H. Porter and Bryan Boudreau, "Information Returns, and Bidding Behavior in OCS Auctions, 1954-1969," Journal of Industrial Economics, 1987, XXXV (June), 517-542.
Hendricks, Kenneth, Robert H. Porter, and Charles A. Wilson, "Auctions for Oil and Gas Leases with an Informed Bidder and a Random Reservation Price," Econometrica, 1994, 62 (6), 1415-1444.
Hendricks, Kenneth, Robert H. Porter, and Guofu Tan, "Optimal Selling Strategies for Oil and Gas Leases with an Informed Buyer," American Economic Review, 1993, 83 (2), 234-239.
Hendricks, Kenneth, Robert H. Porter, and Richard H. Spady, "Random Reservation Prices and Bidding Behavior in OCS Drainage Auctions," Journal of Law and Economics, 1989, 32 (2, Part 2, Empirical Approaches to Market Power: A Conference Sponsored by the University of Illinois and the Federal Trade Commission (Oct. 89)), S83-S105.
Mead, Walter J., Asbjorn Moseidjord, and Philip E. Sorensen, "Competitive Bidding Under Asymmetrical Information: Behavior and Performance in Gulf of Mexico Drainage Lease Sales," The Review of Economics and Statistics, 1984, 66 (3), 505-508.
Milgrom, Paul R. and Richard J.Weber, "The Value of Information in a Sealed-Bid Auction," Journal of Mathematical Economics, 1982, 10 (1), 105-114.
Paarsch, Harry J. and Han Hong, An Introduction to the Structural Econometrics of Auction Data, MIT Press, 2006.
Watkins, G. C., "Competitive Bidding and Alberta Petroleum Rents," The Journal of Industrial Economics, 1975, 23 (4), 301-312.
Watkins, G. C. and R. Kirkby, "Bidding for petroleum leases: Recent Canadian experience," Energy Economics, 1981, 3 (3), 182-186.