Abstract

A good auction design promotes both an efficient assignment of rights and competitive revenues for the seller. The two key factors that determine the best design are the structure of bidder preferences and the degree of competition. With weak competition and “additive values,” a simultaneous first-price sealed-bid auction may suffice. With more complex value structures, a dynamic auction with package bids, such as the clock-proxy auction, is likely needed to increase efficiency and maximize revenues. Bidding on production shares, rather than bonuses, typically increases Government Take by reducing oil company risk.

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