Joint Bidding, Entry, and the Price of OCS Leases

Abstract

We use a two-equation system to estimate the effects of joint bidding on the number of bids and the maximum bid the government received in auctions for Offshore Continental Shelf tracts held between 1979 and 1983. The estimates are corrected for selection bias and simultaneity. We find that joint bidding encourages entry in the sense that the number of bids is positively associated with the existence of joint bidding. We also find support for the hypothesis that joint bidding increases the high bid with the number of bids held constant. We use these results to estimate the cost of a ban on joint bidding for OCS leases.

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