Undergraduate Honors Theses

Thesis Defended

Fall 2017

Document Type

Thesis

Type of Thesis

Departmental Honors

Department

Economics

First Advisor

Oleg Baranov

Abstract

Over the past five years, ten wind lease areas located on the outer continental shelf of the Eastern United States have been sold via a multi-unit auction process. The multi-unit auction format used by the Bureau of Oceanic Management (BOEM) is unique to the sale of wind lease areas. Our primary findings are that, in a simple setting with two symmetric bidders and two identical units, there exists an efficient symmetric linear equilibrium and inefficient asymmetric equilibria in the BOEM auction. We show that the efficient equilibrium is an unique linear equilibrium, which exhibits revenue equivalence with a standard English auction. We then show that the asymmetric equilibria produce higher expected bidder surplus and lower expected seller revenue than the symmetric equilibrium, and establish an inefficiency result. We find that the asymmetric equilibria are more likely to occur than the symmetric equilibrium.

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