This paper documents exploratory drilling activity on offshore wildcat oil and gas leases in the Gulf of Mexico sold between 1954 and 1980. We calculate the empirical drilling hazard function for cohorts in specific areas. For each year of the lease, we study the determinants of the decision whether to begin exploratory drilling and their relationship to the outcome of any drilling activity. Our results indicate that equilibrium predictions of plausible noncooperative models are reasonably accurate and more descriptive than those of cooperative models of drilling timing. We discuss why noncooperative behavior may occur and the potential gains from coordination.

This paper examines federal auctions for drainage leases on the Outer Continental Shelf from 1959 to 1969. These are leases which are adjacent to tracts on which a deposit has been discovered. We find that the data suggest that neighbor firms are better informed about the value of a lease than non-neighbor firms, that neighbor firms coordinate their bidding decisions, and both types of firms bid strategically in accordance with the Bayesian-Nash equilibrium.

This paper documents exploratory drilling activity on offshore wildcat oil and gas leases in the Gulf of Mexico sold between 1954 and 1980. The authors calculate the empirical drilling hazard function for cohorts in specific areas. For each year of the lease, they study the determinants of the decision whether to begin exploratory drilling and their relationship to the outcome of any drilling activity. Their results indicate that equilibrium predictions of plausible noncooperative models are reasonably accurate and more descriptive than those of cooperative models of drilling timing. The authors discuss why noncooperative behavior may occur and the potential gains from coordination.

This paper examines federal auctions for drain age leases on the Outer Continental Shelf from 1959 to 1969. These are leases that are adjacent to tracts on which a deposit has been discovered. The authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms; that neighbor firms coordinate their bidding decisions; and that both types of firms bid strategically in accordance with the Bayesian-Nash equilibrium model for first-price, sealed-bid auctions with asymmetric information.

A study is presented on whether the US Government can increase its revenues from the sale of drainage leases by using a different allocation mechanism. The optimal mechanism is characterized for selling a lease when there is a single informed buyer and a fixed number of uniformed buyers. Implementation and the magnitude of potential revenue gains, if any, are discussed.