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This article extends the theory of legal cartels to affiliated private value and common value environments. We show that efficient collusion is always possible in private value environments, but may [...]

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 tests of rational and equilibrium bidding in a common values model that are implemented using data on bids and ex post values. We also use data on tract location and ex post values to test the comparative static prediction that bidders may bid less aggressively in common value auctions when they expect more competition. We find that bidders are aware of the 'winner's curse' and their bidding is largely consistent with equilibrium.

Learning and strategic delay conditions are defined for exploratory drilling based on federal offshore tract sales between 1954 and 1990. Firms under such conditions generate information externalities due to minimal and uncertain information regarding the tracts. Thus, firms have an incentive to delay drilling decision and a noncooperative Nash equilibrium is developed for drilling programs.

The federal government auctions of offshore oil and gas leases from 1954 up to 1991 were analyzed to evaluate the predictive accuracy of decision models which highlight informational and strategic issues to account for the institutional traits of the leasing program. The formation of bidding consortia, the decision to bid, the government's decision to award to the highest bidder, the timing and incidence of exploratory drilling and other program features were examined and compared with model predictions. The results showed that the leasing program is well-designed.

A model of a first-price, sealed bid auction with a random reservation price was analyzed in the study of the federal sales of offshore oil and gas leases on drainage tracts. Based on the analysis, it was found that the percentage rate of increase in the distribution of the uninformed bid was never greater than that of the informed bid. Moreover, the distributions were found to be identical at bids above the support of the reservation price. It was also found that the informed buyer was more likely to submit low bids.

A government can acquire all rents for oil an gas exploration with a first-price, sealed bid auction, provided that the neighbor firm is excluded from the process. The royalty rate and reserve price should be set to zero, and the neighbor firm should be given an incentive to reveal information, so efficient drilling rule is used by the firm with the winning bid. Some of the rents should be shared if the neighbor firm cannot be excluded from the bidding process.

The practice of joint bidding in auctions of leases on federal property was studied. Joint bidding occurs when at least two companies submit one bid on a lease. The study focused on land off the coasts of Louisiana and Texas in auctions occurring between 1954 and 1979. The results revealed that large firms bid jointly with fringe firms almost 50% of the time during the 1970s. Fringe firms usually bid jointly with large firms because of the capital constraints involved in fringe firms' joint ventures.

This article profiles Richard E. Quandt, a teacher, colleague and mentor at Princeton University. Richard's contributions to the study of economics take on a wide variety of forms. As an econometrician, he witnessed and participated in a modeling revolution as well as the computer revolution. He was a pioneer in discrete dependent variables, in switching regime models, in tests of the standard regression assumptions, in relaxing assumptions about the distribution of error terms, and in many other now-common areas. As an economic theorist, Richard made important contributions to the theory of demand and to models of oligopoly supply. He worked on the impact of uncertainty, on rules of thumb, on capital rationing, on stability, as well as on equilibrium existence. As a colleague, teacher and mentor, Richard encouraged us all in the direction of the best theory and the best measurement method, and in their application to important problems.

Using a panel data set for the 48 contiguous states from 1970 to 1983, several estimates are provided of a Cobb-Douglas production function with three types of public capital as inputs Various specification tests are systematically applied to test for both random and fixed state effects, nonstationarity, endogeneity of the private inputs, and measurement error. In the preferred specification, which is first differences with fixed state effects, the public capital variables are not significant, while the fixed state effects and private input variables are significant. [ABSTRACT FROM AUTHOR]

This paper considers tariff policies in a small open economy in which consumers are spatially distributed. The production technology of the manufacturing sector is assumed to exhibit increasing returns to scale, and its product incurs costs in transportation. Examples are constructed that demonstrate that imposition of an import tariff on this sector can lead to an improvement in welfare, despite the fact that a monopoly position is created for some firm in the protected industry, and even though it incurs higher production costs than foreign firms. [ABSTRACT FROM AUTHOR]

This article analyzes a data set, the first-price, sealed-bid auctions of drainage and development leases on federal land in the Outer Continental Shelf. The use of predatory pricing in the Powder Trust case was discussed. The term Powder Trust refers to a combination in the U.S. explosives industry which began in the 1930s The trust originated in 1872 when it consisted of a loose-knit combination of seven powder manufacturers known as the Gunpowder Trade Association of the United States. In the Powder Trust, the machinery for predatory pricing seemed ominously apparent. Of the 14 companies allegedly preyed upon, the evidence is quite clear that six of these suffered no such fate. It is the author's impression that the other four companies were not subjected to the pricing strategy and the evidence does not allow any conclusion as to the seven of the remaining companies, were in fact subjected to the practice.