Oral auctions deter collusion, impacting natural resource leasing practices.
Auctions are used in many markets, including for leasing natural resources in the US. The way auctions are run by the government has caused debate, with concerns about bidders colluding. The study found that cartels are more likely to form in oral auctions, but not in sealed high-bid auctions. This could explain why sealed high-bid auctions are commonly used.