Relinquishing Riches: Auctions versus Informal Negotiations in Texas Oil and Gas Leasing

• 成果类型: Article
• 署名作者: Covert, Thomas R.; Sweeney, Richard L.
• 署名单位: University of Chicago; Boston College
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20191594
• 发表日期: 2023
• 页码: 628-663
• 关键词: competition; royalties

摘要

This paper compares outcomes from informally negotiated oil and gas leases to those awarded via centralized auction. We focus on Texas, where legislative decisions in the early twentieth century assigned thousands of proximate parcels to different mineral allo-cation mechanisms. We show that during the fracking boom, which began unexpectedly decades later, auctioned leases generated at least 55 percent larger up-front payments and 40 percent more out-put than negotiated leases did. These results suggest large potential gains from employing centralized, formal mechanisms in markets that traditionally allocate in an unstructured fashion, including the broader $3 trillion market for privately owned minerals. (JEL D44, L71, Q35)