Auctions for oil and gas leases with an informed bidder and a random reservation price

A model of a first-price, sealed bid auction with a random reservation price was analyzed in the study of the federal sales of offshore oil and gas leases on drainage tracts. Based on the analysis, it was found that the percentage rate of increase in the distribution of the uninformed bid was never greater than that of the informed bid. Moreover, the distributions were found to be identical at bids above the support of the reservation price. It was also found that the informed buyer was more likely to submit low bids.