Competitive Bidding in High-Risk Situations

Capen, E. C., Clapp, R. V., & Campbell, W. M. (1971). Competitive Bidding in High-Risk Situations. Journal of Petroleum Technology, 23(6), 641-653.

Type

Journal article

Intellectual base

Primary research

Year

1971

DOI

10.2118/2993-pa

Link

https://doi.org/10.2118/2993-PA

Cited from

information_theory

Cited by

2 citations across 2 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Winner's Curse
  • The phenomenon was first named and quantified by petroleum engineers Capen, Clapp, and Campbell (1971) studying competitive bidding for offshore oil leases, where they observed that winning operators systematically earned below-market returns despite no errors in their geology.

    This sourceSeminal paper naming and quantifying the winner's curse from competitive offshore oil-lease bidding, showing the winning bid is the upward-biased maximum of independent noisy appraisals, biased above true value by a margin that grows with competitor count and estimation-error dispersion.

Mechanisms

• Common-Value Bid Shading Rule
  • This is precisely the discipline whose absence produced the original winner's curse: firms that bid their raw estimates on early offshore leases systematically overpaid, winning the blocks they had most overestimated.

    This sourceReports that successful lease bidders can overpay because the winner tends to be the bidder that most overestimates reserve potential.

Verification

This reference passed the adversarial substantiation pipeline: it was checked to exist and to support the claim it is attached to. See how references were verified.

Registry ID ref:9743ce0795df · see in the full table