1932

Abstract

We review the issues involved in designing a mechanism for allocating resource rights. We focus on the case of exploration and development rights for oil and gas leases in US federal lands to highlight the trade-offs at play. The main issues concern the design of the lease contract, the design of the auction, and the supply of leases. A distinguishing feature of oil and gas leases is that the mechanism must solve not only the adverse selection problem of selecting the bidder with the highest valuation but also the moral hazard problem of ensuring that right holders make efficient investment decisions.

Keyword(s): auctionsleasesoil and gasroyalty
Loading

Article metrics loading...

/content/journals/10.1146/annurev-resource-091912-151752
2014-10-05
2024-03-28
Loading full text...

Full text loading...

/deliver/fulltext/resource/6/1/annurev-resource-091912-151752.html?itemId=/content/journals/10.1146/annurev-resource-091912-151752&mimeType=html&fmt=ahah

Literature Cited

  1. Cantillon E, Pesendorfer M. 2006. Auctioning bus routes: the London experience. See Cramton et al. 2006a, pp. 573–91
  2. Cramton P, Shoham Y, Steinberg R. 2006a. Combinatorial Auctions Cambridge, MA: MIT Press
  3. Cramton P, Shoham Y, Steinberg R. 2006b. Introduction to combinatorial auctions. See Cramton et al. 2006a, pp. 1–13
  4. Damiano E, Li H, Suen W. 2012. Optimal deadlines for agreements. Theor. Econ. 7:2357–93 [Google Scholar]
  5. Haile P, Hendricks K, Porter R. 2010. Recent US offshore oil and gas lease bidding: a progress report. Int. J. Ind. Organ. 28:4390–96 [Google Scholar]
  6. Hendricks K, Kovenock D. 1989. Asymmetric information, information externalities, and efficiency: the case of oil exploration. Rand J. Econ. 20:2164–82 [Google Scholar]
  7. Hendricks K, Pinkse J, Porter R. 2003. Empirical implications of equilibrium bidding in first-price, symmetric, common value auctions. Rev. Econ. Stud. 70:115–45 [Google Scholar]
  8. Hendricks K, Porter R. 1988. An empirical study of an auction with asymmetric information. Am. Econ. Rev. 78:865–83 [Google Scholar]
  9. Hendricks K, Porter R. 1992. Joint bidding in federal OCS auctions. Am. Econ. Rev. 82:506–11 [Google Scholar]
  10. Hendricks K, Porter R. 1996. The timing and incidence of exploratory drilling on offshore wildcat tracts. Am. Econ. Rev. 86:3388–407 [Google Scholar]
  11. Hendricks K, Porter R, Tan G. 2008. Bidding rings and the winner's curse. Rand J. Econ. 39:1018–41 [Google Scholar]
  12. Hendricks K, Porter R, Wilson C. 1994. Auctions for oil and gas leases with an informed bidder and a random reservation price. Econometrica 62:1415–44 [Google Scholar]
  13. McAfee P, McMillan J. 1986. Bidding for contracts: a principal-agent analysis. Rand J. Econ. 17:3326–38 [Google Scholar]
  14. Milgrom P. 2011. Critical issues in market design. Econ. Inq. 48:2311–20 [Google Scholar]
  15. Onuma T. 2013. A spatial analysis of exploratory drilling. Unpub. Pap. Dep. Econ., Univ. Wis., Madison [Google Scholar]
  16. Riley J. 1988. Ex post information in auctions. Rev. Econ. Stud. 55:3409–29 [Google Scholar]
  17. Wiggins S, Libecap G. 1985. Oil field unitization: contractual failure in the presence of imperfect information. Am. Econ. Rev. 75:3368–85 [Google Scholar]
/content/journals/10.1146/annurev-resource-091912-151752
Loading
/content/journals/10.1146/annurev-resource-091912-151752
Loading

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error