On Bid Disclosure in OCS Wildcat Auctions

Abstract

I study a game in which two players first bid for offshore tracts (below which oil and gas may be present) and next time their drilling decisions. High types bid more aggressively if the auctioneer discloses bids as this gives them useful information about the profitability of drilling. A low type fears that the disclosure of her "low" bid reduces the other player's incentive to drill. Hence, they bid more aggressively if the auctioneer does not disclose bids. If players are sufficiently patient, it is optimal to disclose bids. Otherwise, it may be optimal not to disclose them.Information Externality, Oil Exploration, Waiting, War of attrition