Alternative Bidding Systems for Leasing Offshore Oil: Experimental Evidence.

In 1978, the U.S Congress instructed the Department of the Interior to experiment with alternative bidding systems for leasing offshore oil tracts. The goal was to encourage participation by small companies by reducing the initial cost associated with the traditional 'bonus bid' system. The author analyzes the results of this unique experiment. The author finds that, although one alternative generated more bids, in general, the number of bids was no higher; the winning bids were no lower; and participation by small companies who already use joint bids was significantly lower than the traditional system, which appears to be superior to these alternatives. Copyright 1994 by The London School of Economics and Political Science.