Probability distribution of bids on outer continental shelf oil and gas leases

TL;DRAbstract

The bids on oil and gas leases on the outer continental shelf are usually treated as observations from a lognormal probability distribution. Occasionally, an alternative distribution, such as a beta, is suggested as the underlying probability distribution. It is demonstrated that the number of bids received on a lease is too small to distinguish clearly among possible underlying distributions. It is shown that the beta and the log-uniform distributions often cannot be rejected as unreasonable hypotheses.

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