Asymmetric information in oil and gas lease auctions with a national company

This paper analyzes bidding behavior in oil and gas tract auctions in Brazil, where the main winner has been Petrobras, a national company. We test predictions from the theory of common-value, first-price, sealed-bid auctions with asymmetric information. The tests indicate that Petrobras was better informed about tract values than other bidders. We show that Petrobras bid higher than its competitors for more profitable tracts, and that it bid more frequently than its competitors for tracts being re-offered after receiving no bids in previous auctions. We also find evidence that Petrobras could bid competitively in a limited number of auctions only, and we discuss how our results can help to improve oil and gas tract auction rules.