[This paper describes the U.S. offshore oil and gas lease sales conducted by the Department of the Interior since 1954. Several decisions are discussed, including bidding for leases, the government's decision whether to accept the highest bid, the incidence and timing of exploratory drilling, and the formation of bidding consortia. Equilibrium models of these decisions that emphasize informational and strategic issues and that account for institutional features of the leasing program are analyzed, and their predictions compared to outcomes in the data.]

Lung-Fei Lee, Robert H. Porter, Switching Regression Models with Imperfect Sample Separation Information--With an Application on Cartel Stability, Econometrica, Vol. 52, No. 2 (Mar., 1984), pp. 391-418

Recent work in game theory has shown that, in principle, it may be possible for firms in an industry to form a self-policing cartel to maximize their joint profits. This paper examines the nature of cartel self-enforcement in the presence of demand uncertainty. A model of a noncooperatively supported cartel is presented, and the aspects of industry structure which would make such a cartel viable are discussed.

The paper analyzes a first price, sealed bid auction with a random reservation price where the object has an unknown common value, but one buyer has better information than the others. We permit the reservation price to be correlated with the information of the informed buyer, which reflects both his assessment of the value of the object and probability of rejection at any bid. Assuming all random variables are affiliated, we establish the following results. (1) The rate of increase in the distribution of the uninformed bidder is never greater than the rate of increase in the distribution of the informed bid. (2) The distributions are identical at bids above the support of the reservation price. (3) The informed buyer is more likely to submit low bids. We demonstrate that these restrictions are satisfied by bid data from the federal sales of offshore drainage leases.