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How Best to Auction Natural Resources

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Abstract

I study the design of auctions of natural resources, such as oil or mineral rights. A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The structure of bidder preferences and the degree of competition are key factors in determining the best design. With weak competition and simple value structures, a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids likely is needed to promote efficiency and revenue objectives. Bidding on production shares, rather than bonuses, typically increases government take by reducing oil or mining company risk.

Suggested Citation

  • Peter Cramton, 2009. "How Best to Auction Natural Resources," Papers of Peter Cramton 09anr, University of Maryland, Department of Economics - Peter Cramton, revised 2009.
    • Handle: RePEc:pcc:pccumd:09anr
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    File URL: https://www.cramton.umd.edu/papers2005-2009/cramton-auctioning-natural-resources.pdf
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to best auction natural resources
      by Economic Logician in Economic Logic on 2009-05-15 05:03:00

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    Cited by:

    1. del Río, Pablo & Linares, Pedro, 2014. "Back to the future? Rethinking auctions for renewable electricity support," Renewable and Sustainable Energy Reviews, Elsevier, vol. 35(C), pages 42-56.
    2. Martin F. Quaas & Ralph Winkler, 2017. "A Market Mechanism for Sustainable and Efficient Resource Use under Uncertainty," CESifo Working Paper Series 6524, CESifo.
    3. Abhishek, Vineet & Hajek, Bruce & Williams, Steven R., 2013. "Auctions with a profit sharing contract," Games and Economic Behavior, Elsevier, vol. 77(1), pages 247-270.

    More about this item

    Keywords

    Auctions; natural resource auctions; oil auctions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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