This is a project of empirical research in industrial organization. It consists of three components. The first and third are joint with Ken Hendricks of the University of British Columbia. We analyze a data set that we have assembled for the federal offshore oil and gas lease sales in the Gulf of Mexico from 1954 through 1990. We also develop and analyze a new data set on small business entry and evolution in Canada. The second component is joint with Doug Zona of National Economic Research Associates; we analyze bid rigging in procurement auctions. The first component consists of a study of joint bidding for federal offshore 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 oil companies. The goal of our research is to determine the role played by joint bids, and whether the ban should have been more or less extensive. Joint bids may foster entry and competition, by pooling capital or information or by spreading risk, but they may have anti-competitive effects by allowing firms to agree to bid less aggressively. This research presents models and results designed to discriminate between these alternative explanations, in order to inform policy decisions. This component is potentially informative for public policy towards research and development, because joint bids are similar to research joint ventures. The second component is joint with Doug Zona. We have obtained an extensive panel data set on annual school milk procurement auctions in Ohio. There is an ongoing antitrust investigation alleging collusion among some of the potential bidders. The purpose of our research is to determine whether these allegations have any empirical validity, and, if so, what the consequences were in terms of excess prices paid by the school districts. The proposed work describes the incidence and characteristics of bid rigging. We study the effect of mergers and plant closings on the patterns of bid submissions, as well as the level of submitted bids. The empirical techniques employed differ from those used for different auctions, as bid rigging schemes depend on the auction rules and the nature of the goods being sold, and because more detailed data on the contracts and on the bidders are available. The general research issue is whether bid rigging schemes can be detected from publicly available data. The third component is also joint with Ken Hendricks. Together with a research team at U.B.C. headed by Raffi Amit, we assemble a longitudinal data base at Statistics Canada that merges employment and tax records for all small business start-ups between 1983 and 1993. The data set allows us to analyze the determinants of small business entry, growth and exit in some detail; this research complements and extends recent analysis of U.S. data sets.
