Journal Article

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

Kenneth Hendricks, Joris Pinkse and Robert H. Porter

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 70, issue 1, pages 115-145
Published in print January 2003 | ISSN: 0034-6527
Published online January 2003 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00239
Empirical Implications of Equilibrium Bidding in First-Price, Symmetric, Common Value Auctions

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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 tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values. We also use data on tract location and ex post values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition. We find that bidders are aware of the “winner's curse” and their bidding is largely consistent with equilibrium.

Journal Article.  0 words. 

Subjects: Economics

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