9308713 Porter This project will extend the investigator's prior empirical research on auctions and bidding and consists of three parts. The first consists of an analysis of the incidence and timing of drilling activity on offshore wildcat oil tracts. A third of these tracts are never drilled, and there is significant delay prior to drilling. A deadline effect is apparent at the expiration of the five year lease term. Initial work indicates that drilling patterns are inefficient, in that there may be gains from coordination of drilling plans. This work will further characterize the drilling decision, in order to determine how firms respond to information that becomes available after the lease sale, and in order to quantify the degree of inefficiency. The second component consists of a study of joint bidding on wildcat tracts. More than half of the bids submitted are joint, and in 1975 Congress banned joint bids involving two or more of eight large corporations. The goal of this research is to determine the role played by joint bids. They may foster competition, by pooling capital or by spreading risk, but they may have anti-competitive effects by allowing firms to agree to bid less aggressively. The project will attempt to discriminate between these alternative explanations, in order to inform policy decisions. The third component will gather data on procurement auctions from the Justice Department and antitrust trial records. Previous work analyzed bid patterns in highway paving contracts let by New York State in the early 1980s, in auctions where a subset of firms allegedly engaged in a bid rigging scheme. This work will examine other data sets, in order to determine the incidence and characteristics of bid rigging in other auction markets. The empirical techniques employed will differ from those used previously, as bid rigging schemes depend on the auction rules and the nature of the goods being sold, and because more detailed data on the co sts of meeting the contract are available. The new data sets will probably include bidding on school milk contracts. ***
