American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.
The expected values of money left on the table are evaluated for lognormally distributed, sealed, competitive bids. Functions are developed and evaluated that can be used to make a priori predictions of money left on the table and a posteriori comparisons with actual bids. Extensive comparisons of federal offshore oil and gas lease bids show agreement with the theoretical function except that some extreme bids appear to depart from lognormality.
We do not know the competitive bidder who first bewailed the amount of "money left on the table" after winning by being the highest (or lowest) with a sealed, competitive bid. The phrase may be colloquial, but the meaning is phrase may be colloquial, but the meaning is clear. If the highest bid wins, money left on the table is the amount by which the winning, highest bid exceeds the next highest bid. Money left on the table is the amount of money bid in excess of what would have been necessary to win had the bids been known.
Since the first federal offshore oil and gas lease sale on Oct. 13, 1954, through a sale held on July 29, 1975, 2,580 leases receiving 9,142 sealed, competitive bids were issued to the highest bidders. The winning bidders spent over $15 billion for the leases, leaving about one-half of that money on the table. Thus, studies in the statistics of money left on the table have a practical cogency.
We used these 2,580 leases as a data base throughout this study. All 9,142 sealed, competitive bids were used excepting 170 (1.9 percent of the total), which were deleted as percent of the total), which were deleted as low, noise bids using the 30–30 deletion algorithm* of Dougherty and Lohrenz.
Previous studies have provided the practical and statistical basis for considering practical and statistical basis for considering federal offshore oil and gas lease, sealed, competitive bids as lognormally distributed. Dougherty and Lohrenz used -the lognormal distribution and derived an expression giving expected values of money left on the table as a function of the standard deviation of bids, and the number of bids per lease, n.
