Joint Bidding in Federal OCS Auctions

Joint bidding is the practice of two or more firms submitting a single bid on a lease. Bidding consortia are common in auctions for offshore leases. The frequency of joint bidding increased markedly during the early 19707s, and became a matter of concern to policymakers. In late 1975, the Department of the Interior adopted regula-tions barring the eight largest crude-oil pro-ducers worldwide1 from bidding with each other for outer continental shelf (OCS) leases. Congress passed a similar ban as part of the Energy Policy and Conservation Act, signed into law on December 22, 1975. The presumption was that joint bidding by major oil companies attempted to lower lease prices by reducing the level of compe-tition. Under U.S. antitrust laws, explicit price-fixing is prohibited. The government may permit joint bidding for oil and gas leases because of the large capital requirements to buy and develop OCS leases. It may be infeasible (for reasons unspecified) for many firms to bid solo. These firms must pool resources in order to participate in the mar-ket. From this perspective, joint ventures encourage competition. Similar arguments have been advanced for joint ventures in R&D activities. Our objective is to evaluate joint bidding in auctions of leases on U.S. federal lands off the coasts of Texas and Louisiana for the period 1954-1979. Previous empirica