POLICY IMPLICATIONS: effects are complex and depend on gov't objectives. Revenue goals points one way, but there are other considerations: #environmental protection, #energysecurity, recreational access, etc. Small #auction design changes can have large, counterintuitive effects.

THE BIG INSIGHT: Secondary noncompetitive sales undermine reserve prices as a revenue tool BUT the net effect depends heavily on post-sale revenues (royalties, rentals). These only occur if leases are actually sold, and generate most revenues - not the initial sale

OUR FINDINGS (TABLE 7):
Montana/Dakotas: Eliminating noncompetitive leasing would:
• ✅ Increase auction revenue: $3.1M → $3.2M (+$97K),
• ❌ Decrease rental revenue: $4.1M → $3.7M (-$346K),
• ❌ Decrease royalties: $792M → $773M (-$19.2M),
• 📉 NET EFFECT: -$19.4M

THE EMPIRICAL CHALLENGE: We can't directly observe bidder valuations, so we combine auction theory with data on outcomes (no sale/noncompetitive sale/competitive auction) to structurally estimate bidder behavior using data on BLM auctions, then simulate different auction formats.

THEORY PREDICTS AMBIGUOUS EFFECTS: Noncompetitive pricing can either increase or decrease revenue depending on whether reserve prices are high or low (see Figure 3). When reserves are high, noncompetitive options increase overall sales; when low, they cannibalize auction revenue

THE ECONOMIC PUZZLE: This creates a #commitment-problem. When bidders have a 2nd chance at lower prices, they strategically withhold bids even when their valuation exceeds the reserve. Bidders only enter auctions if their value exceeds a threshold 2-10x higher than the reserve.

THE SETUP: Until 2022, if no bids met the reserve price at #BLM auctions, leases were sold via #noncompetitive sales (lotteries) at lower prices. The Inflation Reduction Act #IRA eliminated this. The 2025 One Big Beautiful Bill Act #OBBA just brought it back.

JMCs at #AAEA2025 - @wenjie-zhan.bsky.social @thjchen.bsky.social @rachelejones.bsky.social

and also future job candidates @ayeshahmed.bsky.social @mspitzerbrooks.bsky.social