Auctions For Oil And Gas Leases With An Informed Bidder And A Random Reservation Price

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Abstract
The authors analyze a first-price, sealed bid auction of an object with unknown common value, but one buyer has better information. The reservation price is correlated with the informed buyer's assessment of the value and of the probability of rejection. If all random variables are affiliated, the rate of increase in the distribution of the uninformed bid is never greater than that of the informed bid, the distributions are identical above the support of the reservation price, and the informed buyer is more likely to submit low bids. Bids for offshore oil and gas leases on drainage tracts satisfy these restrictions. Copyright 1994 by The Econometric Society. (This abstract was borrowed from another version of this item.)

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