Determinants of the Timing and Incidence of Exploratory Drilling on Offshort Wildcat Tracts

This paper documents exploratory drilling activity on offshore wildcat oil and gas leases in the Gulf of Mexico that were sold between 1954 and 1990, with emphasis on the period before 1980. For each year of the lease, we study the determinants of the decision whether or not to begin exploratory drilling, and the outcome of any drilling activity. Our results indicate that equilibrium predictions of plausible noncooperative models are reasonably accurate, and more descriptive than those of cooperative models of drilling timing. We discuss why noncooperative behavior may occur, and the potential gains from coordination.

Patterns of Trade in the Market for Used Durables: Theory and Evidence

The consumption value of a durable good diminishes as it ages due to physical deterioration and consumers' preference for the new. We develop a model of consumer specialization and trade in the market for used durables based on imperfect substitutability. Imperfect substitutability across vintages is reflected in a declining market price over time. Heterogeneous consumers maximize utility by specializing in durables of differing ages. Consumers must trade to acquire their preferred vintage each period. When there are transaction costs in the secondhand market, the volume of trade due to specialization increases with imperfect substitutability. We examine the determinants of vehicle ownership transfers in Illinois, a measure of trade volume. Observed patterns of trade across automobile model years are consistent with our model, and inconsistent with a model of adverse selection.

Ohio School Milk Markets: An Analysis of Bidding

We examine the institutional details of the school milk procurement process, bidding data, statements of dairy executives, and supply characteristics in Ohio during the 1980's. We compare the bidding behavior of a group of firms to a control group. We find that the behavior of each of the firms differs from that of the control group. We argue that the behavior of these firms is consistent with collusion. The estimated average effect of collusion on market prices is about six and one half percent, or roughly the cost of shipping school milk about 50 miles.

Detecting collusion

Detection and deterrence of collusion are longstanding antitrust problems, made difficult because collusive arrangements are usually surreptitious. In this paper, I discuss factors that facilitate or inhibit collusive schemes, as well as circumstances where detection is possible. I describe how industrial organization economists diagnose collusion (both explicit and tacit) among firms

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

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 a test of equilibrium bidding in a common values model that is implemented using data on bids and ex post values. We compute bid markups and rents under the alternative hypotheses of private and common values and find that the data are more consistent with the latter hypothesis. Finally, we use data on tract location and ex post values to test the comparative static prediction in common value auctions that bidders may bid less aggressively when they expect more competition.

An empirical perspective on auctions

We describe the economics literature on auction markets, with an emphasis on the connection between theory, empirical practice, and public policy, and a discussion of outstanding issues. We describe some basic concepts, to highlight some strengths and weaknesses of the literature, and so indicate where further research may be warranted. We discuss identification and estimation issues, with an emphasis on the connection between theory and empirical practice. We also discuss both structural and reduced form empirical approaches

Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond

Any belief that a shift from uniform to as-bid pricing would provide power purchasers substantial relief from soaring prices is simply mistaken. The immediate consequence of its introduction would be a radical change in bidding behavior that would introduce new inefficiencies, weaken competition in new generation, and impede expansion of capacity.Auctions, Electricity Auctions, Multiple Item Auctions

Noncooperative Collusion Under Imperfect Price Information

Recent work in game theory has shown that, in principle, it may be possible for firms in an industry to form a self-policing cartel to maximize their joints profits. This paper studies the applicability of that work to empirical industrial organization. A model of a noncooperatively supported cartel is presented, and the aspects of industry structure which would make such a cartel viable are discussed