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 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.