Discuss, prove or disprove: winners & losers in oil production

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EnumaElish
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Main Question or Discussion Point

Government holds an auction to sell the right for oil exploration (and exploitation, if any found) on a tract of land to the highest bidder. Rules are: no reserve price; highest price wins and is paid; there will be a sale even if a single bidder shows up and bids zero.

All potential bidders have the same probability distribution for the net present value (NPV) of the oil accessible from the tract. Suppose it is a symmetric distribution with mean M. (Assume that a number of independent engineering studies have confirmed that the likelihood of NPV > M is equal to that of NPV < M.)

At least 30 potential bidders are expected to bid.

A day before the auction, a hot shot newspaper editor claims that "the winner will be a loser."

Discuss, prove or disprove.
 

Answers and Replies

  • #2
rachmaninoff
Homework problem?
 
  • #3
EnumaElish
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rachmaninoff said:
Homework problem?
It can be. I intended it as a fun & games kind of problem.
 

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